This article was originally published in November 2020.

Australian is sometimes referred to as the lucky country. While a generalisation, Australian commercial real estate (CRE) has enjoyed strong investment demand from both local and offshore investors over the past decade. Over the ten years to December 2019, yields had fallen to record lows and transaction volumes achieved record highs. The covid-19 pandemic ended the upswing, bringing the first recession in 29 years and more than halving transaction volumes. However, many of the factors that supported investment in 2019 should return as the economic recovery and pandemic containment process continue to gather pace.

In 2019, Australian CRE transaction volume achieved a record total of AU$45.5bn. Demand was supported by solid and stable economic growth, attractive yields, low interest rates, and an open and transparent economy. Economic growth is expected to recover strongly in 2021 and relatively high CRE yields suggest that investment demand can recover once the pandemic is contained and borders reopen.

Australian real GDP growth fell by 7.0% in the June quarter. While this was the worst quarter on record for Australia, it was a relatively robust performance compared with many other developed nations. The OECD reported Q2 declines of about 10.5% for both the G7 and OECD national averages. Economic growth is expected to be positive again from Q3 in 2020, with the government forecasting, at the 2020/21 Federal Budget in October 2020, real economic growth of 4.25% over 2021. The above average growth is supported by total pandemic-related government stimulus of over half a trillion Australian dollars or 25.6% of GDP.