As government stimulus comes to an end, what is happening in the commercial property sector?

As Australians get closer to the end date for a range of government stimulus packages, speculation about what this means for the commercial property market has begun. The end of support packages such as JobKeeper, land tax reduction, and landlord assistance is assumed to lead to a wave of vacancies.

Throughout Australia, the pandemic caused a seismic shift in workplace cultures. This led to many large companies moving away from their traditional CBD office spaces, especially in Melbourne, to make way for a more flexible and modern way of working.

While state governments used a range of extra measures on top of federal stimulus packages, to support commercial real estate and its tenants throughout the pandemic, these measures are about to come to an end.

Last year was the year of the unknown, but there was a certain amount of protection that we gained from the government through these stimulus packages. Now that this is all coming to an end, it is assumed that this year will be a year of reckoning.

However, since December GDP figures were released, we saw an increase of 3.1 percent over the quarter, and an even larger increase throughout the September quarter, which was originally miscalculated. These numbers represent how quickly the Australian economy is actually moving with the previous two quarters becoming the fastest growth we have ever seen over two consecutive quarters.

Throughout the industrial and commercial real estate sectors, these figures are welcomed and celebrated as signs of perseverance through a tough time, but no matter the strength of the economy, changes within the sector are still inevitable.

It is expected that as stimulus measures ease, retail shops could end up in a similar position to many city offices, which are empty. With small businesses likely to face another tough year ahead, this could in turn trigger distressed selling in the commercial property market, which could send values plunging. This hasn’t occurred as of yet, and it is believed to have been avoided mainly due to stimulus measures.

Predictions for the commercial market short-term are sobering and those investors who are lucky enough to have kept their long-term leases signed or continuing, are likely to come out better on the other side. In fact, many are actually optimistic that commercial property will continue to move forward through this period and return to its former glory in no time.

You might be wondering why many feel so optimistic. Well, the Australian property market is deemed to remain viable long-term due to its overall strength and our low risk for any further pandemic mishaps financially due to our strong health care system. Since the market sits upon such a strong foundation, it has only been slightly damaged, not destroyed and it will eventually heal. It is a hopeful sign to still see displayed interest in the sector, despite the shift in finances that will be seen come the end of March.

Luckily for some investors, this scenario has created the perfect storm that has allowed them to jump on struggling commercial investments and purchase them from their previous owners, as they will, over-time, become a hugely profitable investment.

Mainly what commercial landlords are craving right now is the sense of stability in 2021, especially as stimulus measures end. However, just as every other sector throughout last year, some thrived and some didn’t, but we can have comfort in the fact that the predictions are, that while this year will be tough, it won’t be as tough as last year.

The strong foundation of the commercial sector means the market is appearing stronger than forecast in the lead up to the end of stimulus packages. So, despite a tough few months ahead, there is light at the end of the tunnel.

Infrastructure improvements leading the way for stronger industrial real estate in south-east suburbs

As Australia’s population continues to grow, it becomes necessary for the government to begin infrastructure growth and improvements to support the community’s needs. Rapid population growth and high population density across the east coast has underpinned the increase in land value throughout Australia’s largest capital cities; as land availability for industrial development becomes limited, and its uses restricted to other purposes if in proximity to the CBD.

Recently industrial property occupiers flocked to suburban Melbourne. Luckily for Melbourne’s industrial property market, a range of transport infrastructure improvements are under construction. Several of these infrastructure projects are currently in the works and are expected to have a significant impact on the way the Melbourne industrial market operates, re-shaping demand for industrial land.

The completion of these projects are also expected to support industrial development beyond traditional capital cities industry precincts, and into regional and suburban locations, that are in proximity to new road and rail transport infrastructure.

The Mordialloc bypass will connect the Mornington Peninsula freeway to the Dingley bypass and will help to alleviate delays and improve safety. Credit: urban.com.au

There is currently no doubt that the existing transport infrastructure investments are set to alter the outlook of the industrial market, not only for industrial operations but also for investors and developers currently revisiting their investment strategies. They will need to recognise the ever-changing market dynamics that are created by infrastructure improvements and investments.

For the industrial property industry, the latest instalment from the Victorian government of a $1 billion pipeline of road and rail projects for Melbourne’s south-east will have the largest impact. Motorists and public transport users in east and south-east Melbourne will benefit from an investment in congestion-busting infrastructure, that is set to ease traffic concerns for the rapidly growing region.

The most significant infrastructure improvements through this area, include the Monash freeway upgrade, where an extra 30kms of traffic lanes are being added to improve safety and congestion, the Thompsons Road duplication from Dandenong-Frankston Road to Berwick- Cranbourne Road and the Mordialloc bypass.

The new Mordialloc bypass will help to alleviate delays and improve safety in one of outer Melbourne’s fastest-growing areas. It will connect the Mornington Peninsula freeway to the Dingley bypass. The new arterial road that is set to be finished by late 2021, will improve access to the Dandenong South Employment and Innovation Cluster and industrial areas in Braeside and Moorabbin. Industrial property occupiers will therefore want to locate themselves as close as possible to the Mordialloc bypass. Occupiers are moving from Bayside locations to Braeside industrial market, due to flight to quality and to move closer to home.

 

 

The Braeside/Mordialloc precinct have been impacted by the Keysborough property market over the last 5 years, but now with the road network improving in this area, they are making a comeback. This comeback will be bolstered especially by the new Frasers land subdivision and speculative construction throughout the south-east suburbs. This will naturally build on an already strong industrial property market through the south suburbs.

The industrial market throughout Melbourne’s south-east will become more competitive as a result of the improvement in transport infrastructure, and occupiers flocking close to improved infrastructure.

However, the supply of industrial land throughout this south-east strip is diminishing fast, as occupiers are realising the pure value of the area. Which has led to increased prices of land and rentals and shrinking vacancy rates. The increasing strength in the market is also set to lead to a further increase in industrial property pricing, especially after an extraordinary year for Melbourne’s industrial property market in 2020.

Continued infrastructure projects and improvements from the Victorian government are only leading the way for a stronger industrial property market throughout Melbourne, during 2021 and beyond.

What you need to look out for in the industrial property market for 2021

While 2020 was a year that none of us will forget anytime soon, the clock has now ticked over into 2021 and we are all excited for the new year ahead.

In 2020 the industrial property market prevailed through tough times and came out on top. The events of the year were ultimately beneficial to the industrial property sector, with e-commerce becoming more important than ever. Vacancy levels were extremely low, with strong leasing activity in prime assets driving vacancy levels down. Particularly in Melbourne, the industrial property market hit huge highs as e-commerce created record leasing demands. It was even noted that in the midst of the second wave of Melbourne lockdown restrictions that capital value of prime industrial property rose 6%, between the first and third quarter of 2020.

So, what is expected of the industrial property market throughout 2021?

What is expected to hit and miss this year?

For the commercial and industrial property markets in general we are expected to see a range of hits and misses this year.

2021 Hits

  • Industrial sector and industrial land.
  • Lifestyle region commercial spaces.
  • Suburban retail and suburban office spaces.
  • Brisbane, Adelaide, and Canberra to see huge performance due to strong yields and low vacancy rates.

2021 Misses

  • CBD Office Spaces – especially in Sydney and Melbourne.
  • CBD Retail.
  • International Hotels.

How the current trends are going to carry into 2021

Looking forward in the industrial retail sector, the first expectation of the year is that the increased volume of e-commerce activity will result in record industrial leasing demand for 2021. It is likely that the record year of leasing demand in 2020 will be seen across industrial property markets again this year, underpinned by the continued growth of e-commerce, which is driving up demand for warehouse space.

Supply chains will continue to evolve as needed for the changing demand and the need for fast local delivery of packages, will aid an increase in demand and growth for industrial facilities throughout 2021.

Investors look to re-weight and adapt their portfolios towards industrial sectors

Secondly, it is expected that investors will be focusing their energy more heavily on industrial investments, rather than retail or office spaces in 2021. In 2020 investors who were considering adapting their portfolios to favour industrial investments delayed purchases until there was some clarity on the timeline and stability of border restrictions. So now that 2021 is showing much more stability on this front, it is time for them to invest. A focus on income security and low residential yields, will push investors to look into the industrial sector for more ‘guaranteed’ returns this year. It is also likely that overseas buyers will increase their share of purchases as well. With huge pressure for industrial land availability, which will increase yields and growth, there will become a further need for multi-storey warehousing and industrial floor space.

Cities aren’t at the forefront anymore, and suburbs are the new hotspots

The pandemic seemingly threatened to upend the status quo of city-centricity. While this isn’t expected to completely obliterate industrial spaces within city hubs, the lack of industrial real-estate available within hubs will push industrial property out further into regional and suburban areas. The huge pressure for industrial land availability will move demand towards regional and suburban industrial facilities, and away from city centres. Increased infrastructure investment and dwindling land availability will mean that industrial land value in Melbourne’s sub region is anticipated to reach an all-time high during 2021.

While we cannot predict everything to come during 2021, it looks as though industrial property will continue to hold strong throughout the year. What do you think will happen within the industrial property sector this year?

The value of quality property management services

Through a very difficult year our property management team have been a beacon of hope for our property management clients. They have worked extremely long hours 6-7 days a week dealing with all the challenging aspects brought upon the industry by the pandemic. They kept up with all of the new government legislation and regulations impacting real estate, and ensured it was implemented correctly for the owners.

As a property owner or investor, you might believe that it is just easier to manage all of your properties on your own. However, if something else gets in the way, and the management just gets away from you, it can impact the return on investment that you could receive from your investment. It is in your best interest to ensure that your investment provides returns, by having it managed properly.

Property Management is not just about collecting rent. It is a complex balance between maximising return on investment and ensuring that the property is managed correctly to realise the value of a property, at the same time.

 

 

This is why many opt to have their assets managed by the professionals instead. There are a range of benefits that you can receive from having an expert, handling your assets. Not only is it going to be an easier process for you as an investor, but you won’t have to collect rent, do lease admin or arrange repairs.

Just Commercial can offer a range of property management services that will make your life easier. With significant experience across a broad range of properties, such as shops, office, showrooms, factories and warehouses, they are the right choice no matter your property type.

Our incredible asset management team includes Aviva Basist (Senior Property Manager), Christine Bonnaci (Property Manager), Con Devistaki (Trust Accountant) and Jeanne’ Pickering (Property Manager) who thoroughly invest their time into proactive management, maintenance and ESM.

Property management is one of our key strengths. It is a large part of our business in which we afford a great deal of attention to both the landlord and the tenant, while staying abreast of the ever-changing legislation within the sector.

This is especially important right now as the Retail Leases Act (RLA) has been amended as from 1st October 2020 and obligations for landlords in particular have increased. Landlords are now required to provide information about the availability of an early market rent review to the tenant when notifying them of any option term, and the time frames around notification have also changed to shorter notice period. This is a great example of the increased responsibilities on landlords, and why it is beneficial to use our property management team instead.

 

 

A common issue we find when owners manage their own properties is that they are emotionally involved, and therefore they can let their relationship or closeness with their tenants cloud the landlord tenant relationship. This can result in landlords passing up Rental Review and Lease Options, which can over a long period lessen the returns on their investment.

Whereas when you use Just Commercial Property Management services, they can handle:

  • Rent Collection & Rental Reviews
  • Outgoing Recovery and Disbursement
  • Lease Administration
  • General Services Provided
  • Emergencies/Urgent Repairs
  • New Lettings & Vacating Tenants including Lease Negotiations
  • General – Miscellaneous Fees and Services

All of the benefits from having your asset or property managed by the experts at Just Commercial, outweighs the cons. We aim to maximise your earnings, while reducing expenses and ensuring timely rent collection and payments, as required. We go above and beyond to ensure your property is well managed so you can have greater peace of mind, and can enjoy all the benefits of your investment, without the management.

 

The current changes impacting the commercial property industry in Victoria

Since the beginning of 2020 the commercial property sector has seen unparalleled changes to their operations, as a result of the coronavirus pandemic. However, to get through this virus Victorians must work together and that partnership extends from tenants and landlords, and all the way to banks and the government.

In the beginning of March, the Victorian government implemented legislation and regulations, to assist landlords in navigating the current commercial property industry, and their tenants.

On August 20, the Victorian government announced further changes regarding the rules and regulations for commercial property, landlords and tenants; due to the challenges faced during Stage 4 restrictions.

Commercial and residential tenants and landlords will now be able to take advantage of more support, including further land tax reduction and more grant funding.

We have summarised the updated rules and regulations, and included relevant weblinks, so that you can understand the assistance available, and what changes are relevant to you:

Land tax reduction – The relief measures for land tax include a deferral of 2020 land tax until the 31st March 2021 for all landowners, who own at least one non-residential property and have total taxable landholding below $1million.

The discounts on land tax and deferrals of remaining land tax being offered to landlords, has now been increased to 50% for eligible commercial landlords who offer eligible tenants a 50% or more rent waiver for at least 3 months. Additionally, the Commercial Landlord Hardship Fund has been created in recognition of small, private landlords who may not have the capacity to provide rent reductions to their tenants under the requirements of the Commercial Tenancy Relief Scheme. The CTRS scheme was created to support commercial tenants whose income has been affected by the pandemic.

Eligible small business that own their own commercial premises will also now benefit from land tax relief. To find out more, head here: https://www.sro.vic.gov.au/coronavirus#land-tax-reduction-increase

Landlord assistance – A fund of $60 million will be eligible to small commercial landlords, who have taxable land holdings less than $1million as at 31 December 2020. They will be able to apply for the “hardship scheme”, that can provide up to $3,000 per tenancy to small commercial landlords.

(Please note the fund is only open for eight weeks from August 21, 2020). To find out more, head here: https://www.business.vic.gov.au/support-for-your-business/grants-and-assistance/commercial-landlord-hardship-fund

Rent increases are not permitted for tenants receiving Rent Relief until after 31 December 2020. Tenant lockouts/evictions are not permitted in most circumstances until after the 31st of December 2020. To find out more, head here:  https://www.premier.vic.gov.au/pause-evictions-extended-and-extra-renter-protections

The Victorian Small Business Commission has also been granted increased powers to direct landlords to provide rent relief in proportion with the fall in turnover for eligible tenants. In addition, $600,000 has been allocated to fund advocacy groups to be a voice for vulnerable tenants. The government is also encouraging banks to continue working with their customers, both residential and commercial, who are struggling to pay their mortgage, as a result of the pandemic and corresponding restrictions.

Just Commercial continues to work hard every day to ensure that we continue to facilitate results simultaneously between our 500 + tenants and 200 landlords in this ever changing and challenging rent relief period.

The broader impacts of coronavirus could present the perfect opportunity to review your current commercial real estate portfolio

Greater Melbourne has hit the halfway mark on Stage 4 pandemic restrictions. At the same time the State Government is seeking to extend its emergency powers, while remaining non-committal about whether the middle of September will see an easing of restrictions. There is increasing concern being expressed by the business community – from small businesses to large corporates – about the likely impacts on business viability into the future. However, some obvious trends are emerging that are of real interest to commercial property portfolio owners, particularly in the south-eastern suburbs.

The broad economic uncertainties, combined with more specific economic trends that are already emerging from the restrictions in place, are clearly having an impact on the commercial property sector – a quick glance at the Financial Review and industry publications gives a clear indication of the upheaval that is occurring.

However, as in so many other situations, adversity creates opportunity and this current situation may be just the right time for many investors to review their existing portfolios in order to capitalise on some emerging trends.

In this article we consider each of the core commercial property sectors – office, retail and industrial, with a view to providing investors with some pointers to the opportunities and risks that are emerging.

Offices

CBD fringe and outer suburban office space looks set to experience increased demand as employers look to relocate to reduce rent costs, improve employee amenity and get closer to more intensive economic activity such as manufacturing and logistics. This trend had been occurring even before the pandemic hit. However, the added pressures on CBD office spaces, where physical distancing is difficult to ensure and large-scale air-conditioning and ventilation systems may not be adequate for future needs, are likely to see this trend reinforced.

It may be that older and larger suburban office spaces also need to be updated to meet the surge in demand in new expectations with respect to the physical office environment – however, with an expected uptick in demand, this could well be an investment worth making in its own right.

Retail

Physical retail, particularly in shopping centres, has suffered significantly as a direct consequence of both lockdown periods. While the easing of lockdowns will bring some respite, the reality is that many businesses that previously relied on a physical retail presence will increasingly and, in some cases, exclusively move online.

However, with as with office real estate, changes in community behaviour mean that there is likely to be a greater trend towards shopping locally and this may see a medium-term increase in suburban retail opportunities as the economy begins to return to normal. In particular, with people continuing to maintain caution about close physical interactions and crowds, there is a real emerging opportunity with respect to suburban strip shopping areas, which have slowly been declining over recent years.

Industrial

Industrial real estate presents significant opportunity for investors – whether it’s rethinking existing industrial real estate and how it can be configured to suit the rapidly escalating demand for warehousing and logistics capacity and likely increases in local manufacturing, or looking at a new industrial investment, or capitalising on a maturing investment and selling into a currently strong market with high demand.

Current and prospective commercial real estate investors in Melbourne’s south-eastern suburbs are perfectly placed to benefit from the significant changes in the economy at the moment. If you are considering a review of your commercial property portfolio, it makes sense to discuss the opportunities with an expert at Just Commercial.

What does the future of industrial and commercial real estate look like with the shift to online purchasing? 

Over the past few years e-commerce and online shopping have become a crucial part of business, real estate and our personal lives. People have changed the way they shop, and businesses have changed the way they do business, in line with this emerging trend.

As a direct consequence, the real estate industry has seen an increase in the need for warehouses, to meet the growing demand of e-commerce. While online shopping and e-commerce has seen a steady double-digit growth in previous years, growth has accelerated considerably in 2020, as a direct result of the coronavirus pandemic.

Many people have been forced into online shopping due to the stay at home restrictions put in place by Australia’s state and Commonwealth governments, in order to manage the spread of the virus. While some may never have entertained the option of online shopping in the past, many have now discovered the convenience of shopping this way and experts believe that this trend will continue, even after everything returns to normal.

The huge surge in online purchasing has resulted in a rapid structural shift to e-commerce, with the need for warehouses increasing at an exceptional rate. Accordingly, businesses that have been late to the e-commerce party are now having to lift their game quite quickly. Those that haven’t kept pace with the e-commerce boom in such a fast-moving market are now being forced to rapidly adapt to the online orders increasing as a result of the pandemic.

The pandemic caused the commercial real estate market to experience a monumental shift. While in the past Industrial real estate hasn’t struggled, nothing compares to the sudden increase, felt as a result of Covid-19. Overall, the outlook for the industrial market is bright. This is because, as an asset class, it is better positioned than many other sectors to overcome the changes imposed by the pandemic. So, how exactly will this sudden amplified demand for industrial property, due to the shift in online behaviour, impact industrial and commercial real estate?

Experts believe that this change in buyer behaviour is permanent, and retailers are responding. They are looking to redefine their futures that have been brought forward by three years’ worth of growth occurring in a very short time.

Many will be needing to secure distribution hubs and we expect that coming out of the pandemic there is real potential to see the repurposing of retail assets for distribution hubs. Fringe areas will be in higher demand and will experience rental growth for industrial property such as warehouses and manufacturing sites. Operators will also be rethinking their supply chain models, focusing on accessible inventory in facilities that are designed for faster delivery and holding more stock onshore. This is all aimed to avoid gaps as a result of interrupted supply chains.

A spike in manufacturing activity within Australia is also widely anticipated, so that less manufacturing is being sourced offshore. This will be a part of the emerging strategy for many businesses that will be seeking to ensure that their supply chains are as strong as possible and protected against any possible future disruptions. Any increase in onshore manufacturing will lead to an increased need for real estate, once again seeing an increased need for industrial spaces in the future.

A shift towards online behaviour might also see warehouses and industrial spaces change shape, in order to adapt. There is the possibility, as local manufacturing increases and the requirement for real estate surges, that multi-level warehousing might be introduced so that industrial hubs can expand production and support the growth of their online retail sales.

The need for space will exceed what is available in industrial hubs and these hubs will need to move further increasingly into the rural/urban fringe. We may also see warehouses becoming multi-use, with spaces having to ‘smarten up’ with technology, to allow pick up directly from warehouses and premises that also act as showrooms as well as storage spaces. This would mean that businesses can do more within their space and don’t have to move out of prime industrial areas into more regional hubs.

The growth we have seen as direct result of the coronavirus pandemic will change the future of industrial and commercial real estate as we move forward, if our online behaviours continue. From multi-level to multi-use warehousing and improved technology to pick up orders from hubs, the opportunities in the coming years are considerable.

While no one can tell us what the future holds for these real estate sectors, we are confident that the future of industrial and commercial real estate is full of promise.

The driving demand expected for Melbourne’s industrial real estate sector, post COVID-19

As we have watched the Covid-19 pandemic push many industries into chaos, everyone expected the same to happen with the commercial property sector. There is no doubt that the retail, management and hospitality sectors, represented in the property market by shopping centres, offices and hotels, are all currently facing significant challenges. Yet, while these sectors and the general population are adapting to Australia’s new economic normal, industrial property looks set to boom in the coming months.

While many retailers temporarily closed storefronts in response to government-imposed lockdowns, customers have still wanted to buy. Orders and deliveries have increased as customers who would normally have visited storefronts opted to shop online. From a property perspective, as volumes have dropped from traditional retail, there has been a responding increase in demand for warehouses and distribution centres, to cater to the increase in online purchasing. The e-commerce sector has grown 80 per cent, compared to the same time last year, in the first eight weeks of the pandemic, with volumes reflecting levels normally only seen at Christmas time.

As COVID-19 restrictions ease, the acceleration and saturation of online sales is expected to slow down. However, experts in the sector believe that it won’t revert to pre-lockdown volumes. Australia Post even delivered some insight into their current operation stating, “The recent growth we’ve seen suggests that by 2025 online shopping will account for 16-18 per cent (of parcels) compared to 12 percent in early 2020”.

As was the case before the pandemic, the sector towards the construction of bigger warehouses with greater levels of automation, to cater for an acceleration in online shopping and a more digitally connected consumer. This is ultimately expected to lead to increased demand for industrial real estate post COVID-19.

All Australian capitals are expected to experience direct growth in industrial property markets as a result of activity during the pandemic. However, Melbourne’s industrial property hubs are projected to demonstrate more growth than in any other state. Melbourne’s industrial market is forecast to reach its highest level in 10 years during 2020. Already Melbourne’s industrial land values are growing at the highest rate nationally, at 22.8% for 1.6 hectare lots over the past year.

As Victoria is a hub for national distribution activity, it comes as no surprise that Melbourne’s market will benefit hugely from a continued rise in demand. The unique combination of proximity to a major CBD, but with the benefit of significant amounts of real estate space within the outer suburbs, makes Victoria the ideal location. Large warehouse spaces supported by quality transport infrastructure can be located in close proximity to major company offices located within the business hub of Melbourne.

Another driver for the unprecedented demand in the sector is that capital allocation to the industrial and logistics asset class has now surpassed the volumes seen within the retail sector. This shows a material shift in investor appetites, with industrial and logistics seen as the key to stable long-term value and growth.

Trends like this indicate that demand is not expected to slow anytime soon. Vacancy rates for sought after warehouse and industrial spaces are not projected to increase in the near future. Rather, there is a projected chronic shortage of industrial and logistics space from Dandenong to Keysborough, offering real benefit to landlords.

Post Covid-19 demand in the Melbourne market, combined with already low vacancy rates, will likely prompt speculative warehouse developments around the state. This rapidly evolving market is creating opportunities for developers to undertake projects that will can capitalise on tight vacancy rates in areas in high-demand areas.

It is likely that more industrial property will be developed over the coming years to meet the needs of our population’s newfound for love for online purchasing. A shortage of cold storage space and need for dangerous goods handling is also likely to drive demand for sheds and warehouses.

Any uncertainty felt within other sectors, due to the pandemic isn’t being directly felt within industrial property. The sector is showing no hesitation in moving forward with the expected and current increase in demand. Melbourne’s industrial real estate market is set to be one of very few sectors to see an increased in economic and financial activity during and following the pandemic. It will likely emerge from what was expected to be an incredibly difficult time, stronger than ever. An unexpected yet positive outcome for all those within the sector.

Industrial property tipped to exit pandemic most unscathed

According to new research warehouses and other industrial property will likely be the commercial asset class, to emerge after the pandemic, as most unscathed.

While previously Australia waited to witness the direct social and economic impacts the pandemic would have on the property market, now that restrictions are beginning to lift, we are slowly getting a glimpse into what the future is set to look like.

Prior to COVID-19 the industrial property sector had seen growth, with high investment from international groups, in the Australian market. However, just like almost every other sector, the industrial property sector did take a dip following the onset of coronavirus restrictions in Australia. Unlike other sectors, at the moment the demand for industrial property is expected to rebound, with a continued increase in revenue in the coming years.

Industrial property, especially prime-grade assets, in Melbourne were showing to be incredibly resilience at this point, given the state of the economy. In some areas, despite the work from home orders from the government, office space is outperforming industrial property. While this is expected to be short-lived, the areas that already see industrial property outperforming office space are only going to witness a further increase in that margin, as the pandemic continues.

Development activity in Melbourne over the past year has been strong with the continuing increase of industrial spaces. With south-east Melbourne being the most popular destination in the state for industrial property, it is expected to outperform other areas in the following months.

During the stay at home restrictions, online retail in Australia saw a huge increase in sales, as storefronts closed over the country. Due to this third-party logistics companies with capacity, are looking to secure more industrial space to accommodate the demand. This could lead to a huge demand for warehousing over the next six months, especially in Victoria, since it is the hub for national distribution activity.

Retail isn’t the only sector that may be looking for more industrial space, with the current situation resulting in an increased demand for home delivery services. This is where cold storage facilities especially are set to benefit. The requirements for increased cool room and freezer space will be seen across Australian CBD’s, specifically hubs for hospitality and restaurants such as Melbourne and Sydney.

Over this time, we also expect to see an increase in demand for Australian products. The inability we now have to bring a large amount of stock in from overseas, is making customers more conscious of the safety behind where are receiving imports from.  The reduction in export and import activity delivers a huge opportunity for greater locally manufactured goods and services, which can be easily and quickly distributed into the local communities and across the country. Reinvigorating Australian manufacturing of goods and services will result in the need for bigger and more industrial spaces locally. Once again increasing the reliance on the industrial property market for our ability to continue to increase our local supply chains.

Nonetheless, after the pandemic is over securing adequate storage is likely to be the first thought for many companies who saw an increase in their business as a reaction to the restrictions. This will lead the way for industrial property needs to increase even following the pandemic, depending on how long we remain in a crisis state.

This demand for industrial space is expected to remain strong throughout the pandemic and beyond. The situation might also give a boost to local manufacturing activity, which could further stimulate industrial sales and leasing activity.