#59 The future of commercial property: Demographic shifts you need to know
Apr 3, 2025
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Simon Kuestenmacher, co-founder of The Demographics Group, dives into the critical demographic shifts reshaping commercial real estate. He discusses the rise of regional business hubs and the soaring demand for industrial spaces due to e-commerce growth. The conversation touches on the decline of CBDs and what that means for investors, as well as how generational wealth transfers are influencing younger investors' preferences. Kuestenmacher also explores the profound impact of AI and automation on the future of property investment strategies.
Rapid demographic shifts, including migration and family expansions, are influencing the geographic focus of commercial property investments.
The rise of e-commerce has led to increased demand for industrial spaces, presenting lucrative opportunities for investors targeting logistics properties.
A significant generational wealth transfer is expected to impact the commercial property landscape, although younger investors may face competitive market challenges.
Deep dives
Current Market Insights
The commercial property market is currently witnessing robust activity, with significant transaction volumes demonstrating strong investor interest. Specific regions, such as South East Queensland and parts of North Queensland, are highlighted as particularly favorable for investment due to favorable yield decomposition and price opportunities. Regional markets in Victoria are also performing well, defying concerns about land tax impacts as investors have factored these costs into their overall calculations. Overall, the decrease in interest rates and buoyant buyer activity signal a positive outlook across various sectors, including industrial and retail, although office spaces are experiencing slower recovery trends depending on the location.
Demographic Shifts and Their Impact
Demographic trends play a significant role in shaping commercial property investment strategies. Population growth in Australia is largely driven by migration, with skilled migrants and international students contributing heavily to demand for housing and commercial spaces. There is a noted shift toward urban fringes as millennials seek more space due to family expansion, which influences where commercial investments should be targeted. Understanding these demographic patterns is crucial for recognizing emerging opportunities and potential functionality of areas, particularly as urban centers become increasingly strained from higher densities.
Wealth Transfer Dynamics
The impending wealth transfer from baby boomers to younger generations is projected to alter the landscape of property investment significantly. The transfer of wealth typically occurs following the deaths of baby boomers, which is expected to accelerate in the coming decades, offering younger Australians increased financial capacity to invest in property. However, the timing presents challenges as many younger individuals may find it difficult to compete in a highly competitive market for property, particularly as home prices remain high. The trend suggests that while younger generations will inherit significant assets, they may struggle to leverage these funds effectively until later in life.
E-Commerce’s Influence on Industrial Property
The surge in e-commerce has transformed the commercial property landscape, particularly in the industrial sector. With shifting consumer habits increasingly favoring online shopping, there is a notable demand for industrial spaces to support logistics and storage as retail operations adapt. Vacancy rates in industrial properties have tightened significantly, leading to rental growth opportunities as supply struggles to keep pace with rising demand. As the trend for online shopping continues, investing in strategically located industrial assets becomes critical for investors looking to capitalize on the evolving marketplace.
The Future of Office Spaces
Despite concerns around the fate of office spaces in the wake of the pandemic, there is an argument suggesting that offices are evolving rather than becoming obsolete. The implementation of AI technologies is expected to enhance efficiency in the workplace, leading to an eventual resurgence of in-person work as interpersonal communication gains importance. While certain office segments face challenges, particularly within densely populated CBD locales, demand for flexible, well-located office spaces is predicted to stabilize in the medium to long term. This adaptation in office utility calls for investors to remain agile and cognizant of changes in work patterns to effectively reshape their portfolios.
In episode 59 of Inside Commercial Property, hosts Scott O’Neill and Phil Tarrant are joined by Simon Kuestenmacher, co-founder of The Demographics Group, to explore the major demographic, technological, and economic shifts shaping the future of commercial real estate.
With rapid changes in where and how we work, commercial property investors must stay ahead of trends that will impact office space, industrial assets, and retail centres. Simon highlights the rise of regional business hubs, the growing demand for industrial real estate fuelled by e-commerce, and the long-term effects of AI and automation on workforce dynamics.
This episode covers:
The new settlement patterns – Are CBD’s in decline, and what does that mean for investors?
E-commerce and industrial property – Why logistics hubs are now prime investment targets.
Neighbourhood shopping centres – How demographic shifts are driving demand for suburban retail.
Generational wealth transfer – What younger investors want in commercial real estate.
AI and automation – How technology will reshape property investment strategies.
If you want to futureproof your portfolio and understand the forces driving commercial property demand over the next decade, this episode is a must-listen.
Subscribe now and stay ahead of the market.
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