Surge in Commercial Developments Sweeps Across Australia

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The latest Australian Bureau of Statistics (ABS) data reveals an intriguing trend in the construction industry, as the value of commercial building approvals has been skyrocketing despite a slowdown in residential building projects over the past year.

According to ABS, non-residential building approvals experienced a remarkable monthly growth rate of 39.8%. In contrast, the residential sector witnessed a comparatively modest improvement of 7.7%.

Vanessa Rader, the Head of Research at Ray White Commercial, highlighted that office assets continue to dominate the landscape, with the highest planning activity observed in this asset class.

“Despite the overall low occupancy across many office markets across the country, there has been a 25.69% increase in approvals this year,” Rader said.

“Industrial is less surprising given the overall limited vacancy in this asset class, seeing a 20.35% increase over the year to February 2023, dominated by warehouse developments.”

In a year, the value of residential approvals has declined by 3.15%. Meanwhile, the value of non-residential developments continues to surge, with an increase of 3.61% recorded until February 2023.

Victoria emerged as the frontrunner regarding the value of new developments, with a substantial increase of 19.56% in approvals over the year. New South Wales followed suit with a growth rate of 8.77%, closely followed by Queensland at 4.45%.

However, South Australia, Australian Capital Territory, and Western Australia experienced declines in approvals during the same period, with figures dropping by 42.56%, 37.99%, and 2.91%, respectively.

“Given the mismatch between demand and supply for the residential market, development pressure will likely continue, which may see these crane rates grow across the residential segment in the coming year. Across the commercial markets, there are some mixed results.” Raider said.

While there is potential for a rebound in crane rates due to a strong approval pipeline, high construction and financing costs may continue to dampen activity, particularly in sectors such as office and retail.

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