Division over immigration policy set to shape commercial property market

As Australia approaches the next federal election, which is expected to be held in May 2025, one of the pivotal issues likely to influence the commercial property market is immigration.

Immigration policies and population growth have long played a critical role in shaping the country’s economy, and in the lead-up to the election, discussions around immigration could significantly impact investor sentiment and market trends.

Here are five key ways in which immigration could affect the commercial property market:

Increased demand for office space

A rise in immigration could lead to a larger and more diverse workforce, with businesses expanding to accommodate new employees.

As companies grow and require additional staff, the demand for office space is expected to increase. This could particularly be the case in major cities like Sydney, Melbourne, and Brisbane, towards which many skilled immigrants gravitate.

Commercial property investors may see this as an opportunity to invest in office buildings, coworking spaces, and flexible workspaces to meet this growing demand.

Population growth driving demand for retail and logistical hubs

Higher levels of immigration typically result in population growth, especially in urban centres.

This larger population will drive the need for more commercial facilities, such as retail spaces, shopping centres and logistical hubs.

Retailers and e-commerce businesses will likely expand to cater to the rising number of consumers, leading to increased interest in retail property investments. In addition, the demand for logistical hubs, warehouses, and distribution centres will surge as businesses work to supply a growing market.

Pressure on infrastructure and impact on property value

The influx of immigrants often places pressure on public infrastructure such as roads, transportation, and public amenities.

To accommodate a larger population, the government may prioritise investments in infrastructure projects, including new transport links, roads and other amenities.

This could directly benefit the commercial property market, as properties located near these upgraded infrastructure projects are likely to increase in value.

Commercial investors should monitor government spending plans, as infrastructure improvements in key areas offer promising growth opportunities in particular areas.

For example, Newcastle and the Hunter Region in New South Wales are benefiting from transport-oriented development, as well as South Australia’s Salisbury to Gawler corridor is undergoing gentrification, driven by rail electrification and urban renewal projects and Queensland’s Northern Brisbane Corridor, with major infrastructure projects like The Mill at Petrie and Bruce Highway upgrades.

Growth in key commercial sectors

Certain sectors of the economy are particularly sensitive to immigration, with hospitality and retail industries being at the forefront.

New residents and visitors fuel growth in these sectors, creating a higher demand for commercial spaces tailored to these industries.

Restaurants, hotels, and retail shops may seek to expand, requiring more commercial real estate in popular urban centres and tourist destinations. Keeping a close eye on developments on these sectors is vital for savvy investors.

Political uncertainty and investor sentiment

The political climate surrounding immigration policies can have a significant impact on investor sentiment in the commercial property market.

As the federal election approaches, debates around immigration laws and population growth may introduce uncertainty.

Investors typically prefer stable and predictable markets, and any shifts or ambiguities in immigration policy could affect market confidence. On the other hand, clear and supportive policies promoting immigration could lead to optimism and attract more investment into commercial real estate.

As Australia heads toward the next federal election, immigration will be a key factor to watch for property investors.