A CBD rebound, office adaptation and investment performance are at the forefront of real estate concerns as the industry moves into 2021.
In residential real estate what looked like a horror 2020 shifted course with with home values finishing the year at 2 per cent higher in capitals cities combined and up 6.9 per cent in regional areas according to Corelogic.
The office sector was plagued with lockdowns and work-from-home arrangements impacting occupancy rates while the hotel occupancy also suffered with border closures.
Meanwhile the industrial market steamed ahead with an increase in logistics demand which hit a 10-year-high as retail stores closed and infrastructure pipelines ramped up.
Following the pandemic and huge changes across the market Knight Frank has listed its top 10 predictions for real estate in 2021.
Top 10 property market predictions
| Rank | Prediction |
|---|---|
| 1 | Urbanisation on hold, but cities will reassert their strength |
| 2 | Governments ‘thinking big’ on next wave of transport and social infrastructure projects |
| 3 | Offices will adapt to remain key to collaboration, training and cultural cohesion |
| 4 | The landlord-tenant relationship will adjust |
| 5 | Shifting pattern of prime residential demand to continue |
| 6 | Short supply of prestige residential rentals |
| 7 | Investment performance will be relatively strong compared with previous downturns |
| 8 | Premium on income security as investors look to re-weight and adapt their portfolios toward industrial and specialist sectors |
| 9 | Overseas investors to drive the office market in 2021 |
| 10 | Lower return environment will drive appetite for debt strategies and boost competition in non-bank lending |
^Source: Knight Frank
Knight Frank chief economist Ben Burston said cities will remain the engine rooms of the national economy however regional areas will grow.
“Regional cities like Wollongong, Newcastle, Geelong and the Gold Coast will see accelerated growth,” Burston said.
“They have sufficient scale and critical mass of service sector jobs to continue to develop rapidly, while also benefiting from a tilt in lifestyle choices due to the pandemic that will see some people opting for a less CBD-centric working life.”
Burston added hybrid work arrangements will transform offices into central places for collaboration, culture and connection while tenants seek more flexibility.
“Reflecting uncertainty over future space needs, large tenants will seek a mix of core leased space and flex spaces which can be scaled up and down as needed, and also look for an end-to-end service where workplace planning, design, fit-out, head lease and flex space are managed under the one umbrella,” Burston said.
“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.”
Knight Frank head of residential research Michelle Ciesielski said lockdowns and closed state and international borders have given people time to reflect on their lifestyles.
“As a consequence, more and more people are seeking detached family homes and favouring waterfront and rural homes in particular,” Ciesielski said.
“Large gardens and outdoor space are now more of a priority, with the lockdown period emphasising the connection between wellbeing and the great outdoors.”
Ciesielski added this will drive a strong demand for prime property and rentals with Sydney, Perth and the Gold Coast set to rise.
