The latest data from the Australian Bureau of Statistics (ABS) reveals a continuing upward trend in new business formations. Despite nearly 363,000 businesses ceasing operations over the last financial year, this was more than counterbalanced by 436,018 new entrants, resulting in a positive net change of more than 73,000.

This surge has expanded the total number of businesses in Australia to 2,656,344, marking a 2.8 per cent increase over the past year, and an impressive 17.2 per cent growth over the last five years. This expanding business landscape serves as a key indicator for the health of commercial property markets, signalling a likelihood of increased occupancy demand across various sectors including office, industrial, retail, and alternative uses.

The growth has been widespread throughout Australia, with NSW leading in absolute numbers, adding 25,569 new businesses. Victoria followed with an increase of 18,641, while the ACT and Western Australia both demonstrated the highest percentage growth at 3.5 per cent, adding 1,217 and 8,718 businesses respectively. This consistent growth across different regions underscores the robust nature of Australia's business environment and its potential impact on commercial real estate demand nationwide.

The landscape of business sizes in Australia is also evolving, with significant implications for commercial property demand. In 2023/24, non-employing businesses saw a substantial 4.9 per cent increase, adding 78,144 new entities. Simultaneously, 33,783 previously employing businesses transitioned to non-employing status, potentially dampening commercial accommodation requirements.

However, larger businesses experienced notable growth, with a 5.7 per cent increase in companies employing 20-199 people and a 6.0 per cent rise in those with 200+ employees. Despite a 1.4 per cent decrease in businesses with 1-4 employees, the overall trend, particularly the expansion of larger enterprises, reinforces the need for more expansive commercial premises. This shift towards larger business structures suggests an increased demand for larger commercial spaces to accommodate growing workforces and operations. 

Industry-specific trends are shaping demand for various types of commercial properties. The transport, postal and warehousing sector led growth with an 8.5 per cent increase, likely to drive continued demand for industrial and warehousing facilities. This consistent uptick over the last five years is putting further pressure on low vacancies across most Australian industrial markets, signalling a need for new development during a time of prolonged subdued construction activity. Healthcare and social assistance followed with a 7.7 per cent rise, a segment likely to continue growing as our population ages.

This trend potentially boosts requirements for specialised medical facilities such as suites, medical centres, and private hospitals, as well as care facilities ranging from retirement villages to high-care aged care assets. The financial and insurance services sector grew by 4.8 per cent, offering hope for a revival in office space demand across the country. Conversely, the agriculture, forestry and fishing sector contracted by 1.3 per cent, while retail trade saw a slight 0.2 per cent decrease, potentially adding pressure to the bricks and mortar retail property sector. 

The robust growth in business numbers, particularly among larger enterprises, paints an optimistic picture for commercial property demand across Australia. With significant increases in key sectors like transport, healthcare, and financial services, the outlook for industrial, specialised medical facilities, and office spaces is especially promising. This dynamic business landscape suggests a resilient and evolving commercial property market poised for growth and diversification.

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