Could Queensland be the next frontier for commercial property?
The commercial real estate market is shaped by the way Australians live and work, and this includes regional and interstate migration changes. Queensland, which has long been famed for its great weather, wildlife, and lifestyle, is now fast earning a reputation as a commercial property hotspot, bolstered by increased migration during the pandemic.
Changes to how Australians work and study since the COVID-19 pandemic, along with long lockdown periods and the desire for outdoor space, altered regional and interstate migration patterns dramatically over the past two years. Some of the biggest changes were observed in Queensland, which experienced an influx of almost 85,000 interstate migrants since March 2020, according to REIA’s State of the Industry Report 2022.
The Sunshine State also experienced internal migration changes. With more companies opting for a hybrid working model, many Queenslanders swapped lives in the city for a quieter lifestyle in regional areas. The report revealed that 16,500 people moved from the Brisbane CBD to regional locations from March 2020 to March 2021, up from 9,354 the previous year.
With this movement comes commercial opportunity. Queensland is seeing widespread commercial property growth, which has been particularly apparent in rural areas. Interstate and internal migrants are setting up shops in rural communities along the Sunshine and Gold Coasts. Rising numbers of small businesses in these areas promise significant opportunities for growth at a lower rental rate than in Brisbane’s CBD.
Whilst demand for office and retail spaces in Queensland’s regional areas has increased in line with population growth, industrial property is experiencing the greatest demand. The sprawl of regional populations means that warehousing, manufacturing, and logistics businesses are essential to service these communities properly. According to REIA’s State of the Industry Report 2022, revenues from prime industrial properties in regional Queensland are much higher when compared to CBD property, which can be a draw for commercial property investors.
Looking to the year ahead, Queensland is set to remain a major beneficiary of interstate migrants and continue to attract around 14 per cent of all overseas migrants, which should sustain commercial property growth (REIA State of the Industry Report 2022). However, interstate migration patterns are starting to normalise, with fewer people choosing to make the move to Queensland. Rising interest rates, inflation, and the cost-of-living crisis are likely to slow this interstate migration further. When economic conditions change, people tend to stay put, evading the potential risks of an interstate move. We can look to the immediate aftermath of the Great Financial Crisis in 2007 as an example, during which overseas and interstate migration plummeted across Australia.
Thus, whilst signs currently point to a robust commercial property market (particularly for industrial assets in rural Queensland), investors should keep in mind these shifting economic conditions when considering whether to begin or grow their property portfolio in the Sunny State.
Tom Wallace is the CEO of Re-Leased