The Reserve Bank of Australia’s commitment to pushing for “full employment” could contribute to a boom in commercial property investment in the near future.
Yesterday, the minutes from the central bank’s September monetary policy meeting were released. Members noted that while employment has continued to grow, the unemployment rate has stayed around 5.2% over recent months. As such, they concluded there remains spare capacity within the labour market and that the Australian economy could sustain lower rates of unemployment.
For the RBA to achieve its goal of a 4.5% unemployment rate by 2025 – the level at which it believes spare capacity would be eliminated – a large amount of employees would need to be added to the workforce which would significantly increase demand for office space, according to Colliers International’s latest research.
“If the RBA succeeds in getting Australia to ‘full employment’ of 4.5%, circa 100,000 white-collar jobs would be created each year. This equates to about 1 million square metres of office demand Australia-wide each year,” said Colliers International’s Australian research director Anneke Thompson.
Over 300,000 square metres of office space will be added nationally during the second half of the year, with more than 600,000 additional square meters due to be added to CBD markets in 2020, according to the Property Council of Australia.
With yields for CBD office space reaching as high as 6.7% in Brisbane, 7% in Perth, 7.2% in Adelaide and 7.5% in Canberra, the increased demand likely to arise from growing employment presents a unique opportunity for commercial property investment.
“While reaching an unemployment rate of 4.5% seems like a lofty goal, consider that Australia’s unemployment rate globally is high compared to other G20 nations,” said Thompson.
The US, UK, China and Germany all have sub 4% unemployment rates
“With two further cash rate cuts in Australia likely over the next 12 months, it is not too high a growth scenario to consider strong employment conditions will continue,” she concluded.