Regional renaissance is driving demand for commercial property
Since the pandemic began, new ways of working and seemingly never-ending lockdowns have driven record numbers of Australians to abandon major cities and move to the regions.
Demand for regional property has followed, with house price growth in the regions outpacing capital cities, and rent growth of more than 50% in just 12 months in some of the most popular suburbs.
This growth was unsurprising considering net migration into the regions was just shy of 45,000 people over the 12 months to March this year. Figures from the ABS show that, not only was this a new record, it was a whopping 87% more than the 12 months prior.
Population growth is a key driver of demand for commercial property, and several sectors are already seeing the benefit.
While many retailers have struggled with or continue to struggle with lockdowns, on balance, the sector has been less impacted in the regions compared with capital cities.
This is particularly the case in Queensland, which has seen more population growth in its regional areas than anywhere else in Australia.
Population growth, accompanied by less time in lockdown, supported the creation of 26,000 additional retail jobs in regional Queensland between May 2020 and 2021 according to the Labour Market Information Portal.
More people equals more foot traffic, which is good news for retailers, be it a regional shopping centre or corner store.
From storage units to distribution facilities, larger populations support demand for industrial property. Indicative of the growing demand for industrial property, the transport, postal and warehousing sector has been one of the strongest for jobs growth, adding 8,700 new regional jobs over the 12 months to May 2021 according to the LMIP.
A booming development sector is also supporting demand, due to the need for more regional housing and the HomeBuilder grant.
According to the ABS, in the 12 months ending June 2021, just shy of 64,000 new dwellings were approved in regional Australia. This was an increase of 43% from the previous year, and the highest number of approvals seen since 2004.
Medical and Education
Of all the property types tracked by realcommercial.com.au, medical and life science real estate has seen the strongest growth in leasing demand, with searches in June more than double their pre-pandemic average. Medical services are generally less accessible in rural areas, and as populations grow, so too will the need for these services.
In the 12 months to March, children aged up to 14 made up 23% of the net migration into regional Australia according to the ABS, driving the need for more schools and childcare. Searches on realcommercial.com.au with keywords related to education and training were up by 116% over the 12 months to June, while searches for 9B class buildings were up 138%.
Where is demand for commercial property rising fastest?
The regions which have seen the largest up-tick in commercial property demand are those which have likewise seen the most growth in residential demand.
Comparing the 12 months to June 2021 with the year prior, the regions in New South Wales which have seen the strongest growth in searches on realcommercial.com.au are the Riverina and Central Coast. In Victoria, it was Latrobe Gippsland and Bendigo, while in Queensland Toowoomba and the Sunshine Coast have seen the strongest growth.
While many people have said goodbye to their cities, it seems they don’t want to be too far away. The sweet spot seems to be within two hours of a city, with these regions seeing the strongest growth in demand.