Australian Commercial Developments Soar as Adelaide Maintains Strongest Property Market

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Australian commercial building approvals have surged 39.8% in the past year, with non-residential developments growing 3.61% to February 2023, according to the Australian Bureau of Statistics (ABS). This growth comes despite a slowdown in residential building, which recorded only a 7.7% improvement and a 3.15% decline in the value of residential approvals over the same period [1].

Rowan Crosby of the Property Tribune, states that commercial construction results vary across the country. Victoria saw the greatest value of new development with a 19.56% increase in approvals, followed by New South Wales at 8.77%, and Queensland at 4.45% [1]. However, South Australia, Australian Capital Territory, and Western Australia experienced a drop in approvals [1].

Vanessa Rader, head of research at Ray White Commercial, highlights that office assets remain the primary focus of planning activity. She says, “Despite the overall low occupancy across many office markets across the country, there has been a 25.69% increase in approvals this year” [1]. Warehouse developments dominated the industrial sector, recording a 20.35% increase in approvals [1]. Retail and healthcare assets grew by 5.28% and 4.29% respectively, while aged care approvals dropped by 3.47% [1].

In contrast, Adelaide’s property market remains the strongest in Australia, with the city’s home prices hitting a new peak in April, up 0.41% [2]. Anneke de Boer’s article notes that this growth is attributed to the city’s relatively affordable home prices and low stock levels, which have led to increased competition among buyers [2]. PropTrack Senior Economist Eleanor Creagh said, “As interest rates have risen quickly, the relatively affordable prices of homes in the city have helped to support their value” [2].

South Australia’s market is driven by a variety of buyer types, including first homebuyers, upsizers, downsizers, and investors seeking market stability during a national downward cycle [2]. Nick Smerdon, a property valuer at Herron Todd White, noted that while the number of total listings in South Australia is 6% lower than the previous year, the median days on market have remained stable at 35 days, indicating that active buyers are highly motivated [2].

Despite the overall increase in commercial developments, challenges remain. The RLB Crane Index, which measures construction activity by counting cranes on the Australian skyline, recorded an overall dip across the country for both residential and commercial assets [1]. Rader states that “high construction and financing costs may continue to dampen activity, particularly for those sectors such as office and retail, which have had reduced” [1].

References:

[1] Crosby, R. (2023). Commercial developments on the rise across Australia. Retrieved from https://thepropertytribune.com.au/commercial-real-estate/commercial-developments-on-the-rise-across-australia/

[2] de Boer, A. (2023). Adelaide maintains top spot: Strongest market in Australia. Retrieved from https://thepropertytribune.com.au/market-insights/adelaide-maintains-top-spot/