The firm’s latest Australian Regional View reveals investment reached $6.2 billion last year – the third-highest level on record - accounting for about 11 per cent of national activity.
Retail, industrial, and hotels led activity, on the back of rising population, economic diversification, and infrastructure investment.
Retail, industrial and hotels led activity as population growth, economic diversification and infrastructure investment increased demand across regional centres.
We spoke to Alistair Read, Knight Frank Senior Economist, about what is behind the regional investment surge.
Population Growth Packs Punch
Regional Australia is home to about 8.9 million people, representing 32 per cent of the national population.
That figure is forecast to rise by about 10 per cent over the next decade, with much of the growth likely to concentrate in coastal centres with strong transport links.
The Gold Coast is expected to record 19 per cent population growth, followed by Wollongong at 16 per cent, Townsville at 14 per cent and Newcastle at 11 per cent.
Regional economies are also becoming more diverse, with healthcare, education, defence, logistics, renewable energy and advanced manufacturing driving employment and business growth.
The combination of population growth, new jobs and infrastructure investment is being reflected in demand for office, industrial and retail property across major regional centres.
“These three forces are compounding rather than acting in isolation,” Mr Read said.
“Combined with significant infrastructure spending, regional market assets are increasingly generating returns off their own strengthening fundamentals.”
Regional Investment Gains Ground
Regional investors are broadening their horizons, with capital flowing into a wider mix of commercial assets.
Retail accounts for more than 40 per cent of regional transactions. Industrial and hotels follow.
Mr Read said the broadening range of assets was creating new opportunities for investors across regional commercial property.
“The emerging story is Seniors Housing and Care, where Australia's ageing population is a structural tailwind attracting institutional capital as older Australians leave the capitals for regional affordability and amenity,” he said.
New Opportunities Take Root
Tourism and agriculture are creating new sources of demand for regional commercial property.
Tourism Research Australia forecasts a 22 per cent increase in tourism spending to $233 billion by 2030, which is expected to support retail, hotel and service-related commercial property in regional areas.
Mr Read said the regions are well placed to capture a disproportionate share through retail, hotel and service-oriented assets.
“Strong outcomes in the agricultural sector are also driving new opportunities, with favourable seasonal conditions and strong commodity prices - particularly in beef - supporting demand for food processing facilities and rural logistics,” he said.
“Glasshouses and controlled-environment agriculture are also an emerging asset class, directly linked to the significant growth in horticultural production over the past decade.”
Growth Markets To Watch
The report identifies Newcastle, Wollongong, the Gold Coast, Townsville, Tamworth, Wagga Wagga, Cairns, Mackay, Darwin and Hobart as regional markets that will benefit from population growth, new jobs, infrastructure investment and improving business confidence.
Geelong, the Sunshine Coast and Fraser Coast are also highlighted as future growth markets, supported by lifestyle appeal, relative affordability and strong employment opportunities.
Mr Read said the strongest growth should come from coastal cities combining lifestyle appeal, affordability and employment depth.
“Sustaining it will depend on the infrastructure pipeline being delivered — transport, health and education are what make these cities liveable enough to keep attracting people, and that inflow is what allows employment bases to widen and local economies to diversify further,” he said.
“Markets that get this right will likely see income growth and hence long-term capital growth in their commercial assets.”
