Australian superannuation funds could channel at least $68 billion into the commercial estate sector over the next two years according to CBRE’s 2022 Pacific Real Estate Market Outlook.

The report highlights that 2022 is shaping up to be another year of strong growth for the property sector, with Australia’s GDP expected to grow by 3.5-4.5%, Australian unemployment to fall by 0.5%, and companies to take advantage of top-line growth by hiring and upgrading office space requirements. 

In tandem, commercial real estate investment volumes are expected to be circa 10% higher in Australia and New Zealand this year – building on last year’s record sales tally of $50 billion. Offshore investment is expected to remain a key driver, in tandem with rising superannuation fund allocations to real estate.

“Foreign investment reached a record high in 2021, and Australia’s border re-opening should spur further interest. There is also scope for an incremental $68 billion of inflows by 2024 from Australian superannuation funds if asset allocation to property returns to historical levels of just over 8%. The numbers could be even bigger if funds chase the inflation hedge offered by real estate,” said Sameer Chopra, CBRE’s Head of Research, Pacific.

Immigration, residential prices, and commercial rent growth will be other key market drivers in Australia.

“Australia’s focus on returning citizens and skilled migrants will be one of the main drivers of the speed of recovery in the real estate sector. An inflow of 490,000 migrants by 2024 could set the scene for an incremental 900,000sqm of office space, 200,000 dwellings, 2,200,000sqm of industrial space, and $6.7 billion of retail spend,” Mr Chopra said.  

“Casting an eye to residential, Australia has an under-supply issue and prices should increase 5%-10%, with Brisbane best positioned to achieve double digit price growth. Positive rent and price trends for units could also see a doubling of Australia’s announced build-to-rent pipeline to around 20,000 apartments.”

Commercial rent growth will be another market accelerator, with CBRE’s Outlook report highlighting industrial rents in Australia and New Zealand have finally started to be more reflective of the very favourable demand conditions.

Low single-digit net rent growth is also anticipated on the office front, helped by a predicted peak in incentives around the middle of 2022.