Colliers Australian directors provide their comments on the 2024 Federal Budget for key sectors of the Australian Property Market. 

Office

The two dominant themes of small business support and ESG related initiatives that had implications for the office sector from last year’s budget, remain similar this year. Changes to drive a more efficient and timely process of the foreign investment framework to simplify the process is an important inclusion to help drive office sector investment and foreign capital flows over the longer term.

Cameron Williams – Managing Director, Australia, Office Leasing

“The continued support of SME’s with the extension of schemes such as asset write-offs and energy bill relief, are key to the health of office demand in Australia, with around 80% of leasing activity per year attributed to tenants below 1,000 sqm.  Further investments introduced in the budget around the acceleration of private investment to produce renewable energy and climate related innovation, could foster an increase in demand from smaller size finance and investment companies, such as venture capital over the short to medium term.  The health of SME’s, particularly start-ups and innovation companies backed by further government funding, is also a positive for the flex-space industry.”

Adam Woodward – Head of Office Capital Markets, Australia

“Following last year’s introduction of an increase to the energy ratings required MIT’s tax concessions, this year’s budget has had less direct impacts related to office investment.  The 2024 budget has included changes to Australia’s foreign investment rules which aims to accelerate approvals for overseas investors with a proven track-record.  The more efficient and timely process of the foreign investment framework should help to attract foreign capital flows into Australia, with offshore capital an important driver of office asset investment.”

Industrial

The key emphasis on the net-zero transformation and the Government’s commitments in clean manufacturing, infrastructure, transport, and international trade sectors will drive future demand for modern manufacturing and warehouse facilities in Australia.

Gavin Bishop – Managing Director, Industrial and Logistics

While demand from tenants in traditional sectors remains solid in the current Australian industrial logistics sector, there will likely be a more diverse take-up profile from the rising manufacturing, international trade, renewable energy, resources, and defence related sectors. The 'Investing in a Future Made in Australia' initiative provides guidance and support for the rapid development of renewable energy-related industries. Tenant demand for a new generation of industrial and logistics facilities with access to renewable energies, higher operation and cost efficiency, and automation potentials is expected to further increase.

Retail

Government assistance with the cost-of-living pressures and Stage 3 tax cuts will assist in easing the burden currently felt from Australian households and will support retail spending in both the short and long term throughout the economy.

Lachlan MacGillivray – Managing Director, Asia Pacific, Retail Capital Markets

“Cost of living relief and the implementation of Stage 3 tax cuts will be a welcome reprieve for households in the Australian economy, supporting consumer spending. Despite the current challenges facing households, the proposed support packages are expected to provide positive momentum for the retail sector in both the short and long term as we navigate through the present economic cycle. The prevalence of variable rate mortgages in Australia makes households more susceptible to high interest rates compared to other similar economies; however, this also means that any reduction in interest rates quickly benefits consumers.

The Australian retail sector stands out among commercial asset classes for its adoption of ESG initiatives. We welcome the Governments investment into furthering our Solar and other ESG technology, with any advancements in efficiencies able to benefit the retail sector and local communities in the future.”

Michael Tuck – Head of Retail Leasing, Australia

"The cost of living relief provided in the Budget will be a welcome aid in easing pressures on households and consumers. However, small businesses and tenants continue to face rising operational costs and are feeling increasing pressure. The Budget strikes a balance by supporting households without exacerbating inflation, which will ultimately benefit the retail sector as we navigate current macroeconomic challenges. Australia's solid economic fundamentals and strong population growth make it an appealing market for international brands seeking to establish a market presence here."

Residential

Housing continues to be a pivotal issue with the budget contributing funds to develop social housing and assist renters under stress, however reversing the shortfall of supply will be more complex than that addressed in the budget.

Diana Sarcasmo – Managing Director, Residential

“The budget supports many households that are most acutely impacted by affordability issues with increased funding of affordable housing. Whilst encouraging to see increased funding for the training of construction workers, it cannot compensate for the critical requirement for more skilled workers to help deliver more supply now. Many market hurdles still need to be overcome to begin addressing the supply imbalances, but the budget’s direction provides some positive steps.

Robert Papaelo – National Director, Capital Markets, Residential

“The FIRB changes to allow overseas investors to purchase established BTR assets will support liquidity in this market over time. The ability to open the pool of prospective investors will also facilitate the recycling of capital to underpin the creation of more new supply.”

Agribusiness

The $789 million investment announced over the next eight years will help farmers and producers prepare against the effects of climate change while also maintaining agricultural resilience

Rawdon Briggs – Head of Agribusiness, Transaction Services

“Farmers, standing at the forefront of climate change, confront increasingly severe natural disasters and extreme weather patterns, impacting their livelihoods. The $789 million investment announced in the Budget over the next eight years will assist farmers and producers prepare for these challenges, strengthen sector resilience, and maintain Australia's image as a reliable trading partner.

However, investing in agriculture encompasses more than just growing crops, it also entails building resilience, sustainability, and prosperity for our farmers and rural communities. While commendable, some of these initiatives are inadequate, offering only temporary solutions that fail to address deeper underlying issues. Nonetheless, there are commendable initiatives such as emissions reduction. Also, the Landsat Next satellite program, though promising, could have a more significant impact if it were made open-source and accessible to all.”

Healthcare and Retirement living

In the new Budget, the Government continues its commitment to the consumer, providing high-quality public health services and cheaper medicines to maintain the resilience and security of the healthcare system. Despite home-based age care being supported in the budget, demographic trends in aging continue to place pressure on home care such that demand exceeds supply. In residential aged care there awaits formal confirmation of the Aged Care Task Force amidst ongoing sector reform, while elsewhere in private health sector the effect of the budget is neutral until such time as interest rate reductions take effect.

Ian Sanders – Head of Transaction Services, Asia Pacific, Healthcare and Retirement Living

“By its omission in the Federal Budget, the Aged Care sector benefits by the tactic acceptance of the major recommendations of the Aged Care Task force. Other than the Aged Care sector, the effect on care delivery in the private sector is neutral until such time as interest rate reductions take effect. Broadly the budget demonstrates a long tradition of investment by government in the efficient delivery of healthcare services.”

Hotels

Hotels across Australia continue to show positive trading upswing as markets approach pre pandemic trading levels. Whilst the growth profile projects a strong and progressive tourism recovery, supported by increases to aviation capacity and strong desire to travel to Australia, the policy settings to support this were less pronounced in the 2024 Federal Budget.

Karen Wales – Head of Hotels, Australia, Transaction Services

“Diversification and active risk management will be critical components of portfolio construction in the coming cycle. Being agile in this environment is critical, so investors can adopt a dynamic asset allocation process to take advantage of mispricing and short-term volatility. Investors must adopt a tactical approach, learning to discern the dynamics and differences of assets within the sector, working with partners to address gaps in expertise, and standing ready to move as rare opportunities arise.”