Navigating 2024: An Economic Outlook with a Focus on the Commercial Property Market

Introduction:

In this blog, we’re delving into the economic outlook for the year ahead, examining various economic factors, with a particular emphasis on the commercial property market – an industry that plays a pivotal role in our daily dealings. But before we dive into the economic landscape of 2024, let’s take a moment to reflect on the challenges and successes that defined the year just passed.

2023 in Review:

The economic canvas of 2023 featured a mix of conditions, marked by soaring inflation rates and several increases in the official cash rate. Despite these challenges, the national unemployment rate held steady at a commendably low level of sub 4%. Commercial property transactions saw a reduction in volume, but strong demand kept yields low.

On the residential front, the market exhibited resilience with an average growth of 8.1%, as per the CoreLogic Home Value Index. 2023 proved to be a year of both trials and triumphs, creating a lean period for some and a rewarding period for others. The trajectory of the year witnessed a cooling off of inflation, laying the groundwork for a more stable interest rate environment and instilling greater confidence in consumers. Now, let’s turn our attention to the economic forecast for the year ahead, drawing insights from our business interactions, global economic trends, and various sector outlooks.

 

Key Trends and Influences on the Commercial Property Market in 2024:

Global Economic Growth:

The average global economic growth stands at approximately 3%, aligning with the long-term average. However, when focusing on advanced economies like Australia, the average drops to around 1.5%, reflecting the fluctuating economy of the past year. Emerging markets and developing economies continue to show strength, providing a counter-balance and stability in the market. Anticipations suggest a similar trend through the first half of 2024, with conditions improving in the latter half.

Inflation Pressure:

High inflation rates in recent years, triggered by various factors, are gradually stabilizing. The December 2023 quarter figures indicate a continued reduction in inflation, providing potential stability in the market. As economic growth picks up, the trend toward more normal inflation levels is expected to continue throughout the year, easing the pressure on the RBA to squeeze interest rates higher. [Learn more about Rising Interest Rates & the Commercial Property Market]

Unemployment Rate:

A record-low unemployment rate of about 3.8% poses challenges for businesses in terms of staff recruitment and wage growth. The wages index increased by 4% from September 2022 to September 2023, the highest annual growth since 2009. With a rebound in immigration numbers, the expectation is for a moderate increase in the unemployment rate, striking a balance in the job market. This, in turn, should have a positive impact on business conditions and confidence.

Immigration and Property Demand:

The resurgence of immigration in Australia has had a dual impact on both the job market and the property sector. Increased demand in the rental market, coupled with low vacancy rates, attracts more investors, [Learn more about Investment Sales in Commercial Property] which in turn creates upward pressure on property values. The CoreLogic data reveals an 8.1% average increase in Australian Housing Values in 2023, demonstrating the resilience of the property market. This trend is anticipated to continue and gain further momentum through the progression of 2024.

Interest Rates:

Despite rate rises in 2023, the property market performed well. With inflation gradually coming under control, a stable interest rate climate is expected in the coming months. While a surprise decision by the RBA could lead to further rate increases, the consensus leans towards stability through the first half of 2024, with a potential decline in rates in the latter part of the year. A stable interest rate environment is likely to generate further confidence in the business community, driving activity in the Commercial Property Market.

“A stable interest rate environment is likely to generate further confidence in the business community, driving activity in the Commercial Property Market.”

Conclusion:

Predicting the course of an advanced economy is challenging, yet there’s cause for optimism in the opportunities that 2024 may offer. The year ahead, while not devoid of challenges, presents indicators of improvement that could lead us back to more prosperous times. It will require collective effort to maintain momentum and ensure a positive trajectory. Here’s to a year of hard but rewarding work, exciting challenges, and overall success in 2024!