Year in review: 2023 real estate market evolves and adapts accordingly to global trends

In a year characterised by evolving work arrangements between employers and employees, the economic flow-on effects of the COVID-19 pandemic, increased interest rates and the current cost of living, real estate has seen a level of turbulence in an array of sectors, as the market responds to the landscape.

Working from home is becoming an increasingly prevalent strategy being adopted by businesses and employees alike, as the two aim to strike the perfect balance between time spent collaboratively in the office, as well as the flexibility to work from home. 

This trend has influenced business’s office space requirements, as Devine Property’s Commercial Property Representative, George Wilkinson, recognises as a key shift in the respective market.

“In the office sector, the hybrid model has become increasingly prevalent, influencing the design and utilisation of office spaces. Many businesses are re-evaluating their office requirements, leading to a focus on flexible and collaborative work environments. We believe this hybrid model is here to stay, which means an adjustment in the market for these spaces,” said Wilkinson.

From an industrial perspective, the market has been particularly strong with businesses requiring space to facilitate the growth of e-commerce, which means an increased demand for the housing of products and equipment. A lack of available space has made for a competitive industrial real estate market in the Hobart area.

“The industrial property market has remained robust (in 2023), supported by the growth of e-commerce and increased demand for logistics and distribution centres. The rise of technology-driven industries and the evolution of supply chain models have further fuelled demand for industrial spaces. 

With a current lack of development approvals and surging construction costs, we have seen demand levels remain high and increased rent growth for current landlords with properties of this nature,” commented Wilkinson.

Perhaps one of the more tumultuous sectors, retailers are navigating the constant evolution of consumer psychology and behaviour, as e-commerce continues to rise, which presents the question of commitment related to brick-and-mortar storefronts and how much space is required to generate a return on investment.

Coupled with the competition for available space in Hobart, the retail sector continues to navigate the economic and consumer trends, considering the diversity of opportunities to conduct their sales with reduced overheads. 

Executing one of the largest leasing transactions of 2023, Devine Property leased the 44-46 Elizabeth Street Mall space to footwear giant JD Sports, which highlights the potential for brick-and-mortar stores to thrive in the current digital climate.

“Retail properties have transformed, with a growing emphasis on experiential retail and omnichannel strategies. Retailers are adapting to changing consumer behaviours, integrating online and offline channels to enhance the overall shopping experience. Devine Property was responsible for one of the largest leasing transactions of 2023, leasing 44- 46 Elizabeth Street Mall formally occupied by Telstra to JD Sports, a high-end athletic footwear retailer,” added Wilkinson.

Moving into 2024, a range of factors will make for another evolving year of real estate across all sectors. Alternate investment options such as fixed government bonds, term deposits and equities offering similar growth will likely have an impact on the market.

“For next year, the commercial property industry in Australia is poised for continued evolution. The market is expected to respond to global economic trends, environmental considerations, and advancements in technology. The ongoing impacts of regulatory changes, and sustainability concerns are likely to shape the industry's trajectory,” finished Wilkinson.