Global residential and commercial property consultancy Knight Frank has just released its Top 10 predictions for Australia’s Property Market in 2021, with the pandemic set to reshape the future of business premises.
With more employees working remotely, a shift is forecast where facilities will be less about individuals and more about coming together.
“Physical offices will be increasingly grounded in the concept of wellness, both mental and physical, meaning greater emphasis on green spaces, exercise and retreat rooms as well as natural light,” said Knight Frank Chief economist Ben Burston.
“In an environment of higher vacancy and the greater choice this implies for tenants, lower grade space which cannot meet more stringent requirements will increasingly become redundant.”
Accelerated growth is forecast for regional areas of Wollongong, Newcastle, Geelong and the Gold Coast.
With more people opting for a less CBD-centric working life, these hubs have sufficient scale and critical mass of service sector jobs to allow rapid development.
Capital cities will, however, remain the ‘engine rooms’ for the national and global economies.
New infrastructure projects, enabled by the low interest rate environment, are also predicted to help the recovery during 2021.
Mr Burston anticipates renewed debate on projects that were previously considered too expensive such as faster rail connections between Sydney, Newcastle and Wollongong; another airport for Melbourne and improved cycle access in all major CBDs.
“Besides these transport initiatives, we expect more emphasis to be given to social infrastructure projects going forward, encompassing social and affordable housing, renewable energy and aged care facilities,” he said.
Larger tenants will be seeking flexibility with a mix of core leased space and flex space that can be scaled up and down as needed. They will also be looking for end-to-end service where workplace planning, design, fitout and head lease are managed under the one umbrella.
“Alongside more frequent break clauses, this will place greater management pressure on assets with long WALE tenancy schedules potentially having a number of break points,” Mr Burston said.
The aftermath of lockdowns and border closures due to COVID-19 has given people time to reflect on their lifestyle and whether their current home is suitable.
This will drive demand for prime property in 2021 with prices expected to rise in capital cities led by Sydney, Perth and the Gold Coast.
“As a consequence, more and more people are seeking detached family homes and favouring waterfront and rural homes in particular,” said Knight Frank’s Head of Residential Research Australia, Michelle Ciesielski.
“Large gardens and outdoor space are now more of a priority, with the lockdown period emphasising the connection between well-being and the great outdoors.”
Strong rental growth in the prestige market is expected in the coming year with rising expat demand.
Renovation activity and demand for part-time city living to complement rural or country homes will also add pressure to the availability of high-end properties.
Top 10 predictions for the Australian property market 2021
- Urbanisation on hold, but cities will re-assess their strength
- ‘Thinking Big’ on next transport and social infrastructure projects
- Offices will adapt to remain key to collaboration, training and cultural cohesion
- The landlord-tenant relationship will need to adjust
- Shifting pattern of prime residential demand
- Short supply of prestige residential rentals
- Investment performance will be relatively strong compared with previous downturns
- Premium on income security as investors look to re-weight and adapt their portfolios towards industrial and specialist sectors
- Overseas investors to drive the office market in 2021
- Lower return environment will drive appetite for debt strategies and boost competition in non-bank lending