The Future of Office Spaces and Industrial Units

The landscape of commercial real estate in Australia is changing rapidly. Economic shifts, technology, and changing consumer preferences drive this transformation. As small businesses encounter challenges, will these commercial properties lose their appeal?

The Importance of Small Businesses

Small businesses are essential to the Australian economy. They represent over 97% of all businesses and employ nearly 44% of the workforce. This statistic highlights their critical role. For example, a recent survey showed that local cafés, retail shops, and service providers collectively create thousands of jobs annually in regional areas.

When small businesses thrive, the demand for office & retail spaces and industrial units increases. Retail shops need storefronts, while service providers often require dedicated office spaces. The performance of small businesses directly impacts commercial real estate demand.

Current Trends in Office Spaces

The rise of remote work and flexible arrangements has transformed traditional office spaces. Many companies are reducing their office sizes, opting for co-working spaces or entirely remote setups. For instance, a study found that 70% of organizations utilize some form of hybrid work model.

This shift raises questions about traditional office space value. However, not all office spaces will lose value. Properties that adapt to modern business demands—by providing flexible layouts and modern amenities like high-speed internet—are likely to stay competitive.

Many office spaces are being utilized for storage or part storage for online businesses.

Below is a snapshot from ABS statistics on Business entry and exit:

Quarterly experimental counts by ABS

In the March quarter 2025 there was a:

• 0.8%, or 20,262 increase in the number of businesses

• 4.3% entry rate, with 115,068 entries

• 3.5% exit rate, with 94,806 exits

• 1.3% (22,579) increase in non-employing businesses and 0.2% (2,317) decrease in employing businesses

Industry subdivision

In the March quarter 2025, the subdivisions with the largest quarterly net increase in businesses were:

• Postal and Courier Pick-up and Delivery Services (2,760 businesses or 4.2%)

• Property Operators and Real Estate Services  (2,554 businesses or 0.9%)

The subdivisions with the largest quarterly net decrease in businesses were:

• Other Store-Based Retailing (185 businesses or 0.2%)

• Other Goods Wholesaling (121 businesses or 0.7%)

  
  

Industrial Units and Their Role

Conversely, industrial units are experiencing a surge in demand. The growth of e-commerce has amplified the need for logistics and distribution centres. For example, up to 40% of Australian consumers now shop online regularly, placing immense pressure on warehouses and manufacturing facilities near urban areas.

Yet, this demand hinges on the strength of small businesses. If small manufacturers and distributors falter, the demand for industrial units could diminish. This connection emphasizes the need for ongoing support for small businesses to sustain the vitality of industrial real estate.

The Impact of Economic Factors

Economic elements are vital in shaping the future of office spaces and industrial units. Interest rates, inflation, and government policies significantly influence the commercial real estate market. For example, as interest rates rise, investment in new office developments may slow down. Similarly, a 2% increase in inflation could lead to higher operational costs for small businesses.

Government initiatives that support small businesses can have a domino effect on commercial real estate. Programs providing financial assistance, tax breaks, or grants can help small businesses thrive and sustain demand for office and industrial spaces.

The Role of Community Support

Community support is crucial for small business survival. Local governments, organizations, and customers can create a supportive environment. Initiatives such as farmers' markets, showcasing events & business incubators, and local festivals help small businesses gain visibility and attract customers.

When communities unite to support local businesses, it can spark growth. Increased customer patronage can lead to business expansions, driving demand for commercial properties. This mutually beneficial relationship emphasizes the importance of community involvement in keeping office spaces and industrial units valuable.

Future Insights

Looking ahead, the future of office spaces and industrial units in Australia will be influenced by various factors. The changing nature of work, economic conditions, and community support will play significant roles.

Adaptability will be paramount for office spaces. Properties that offer flexible solutions and meet evolving business needs will likely retain their value.

Meanwhile, industrial units could thrive as long as small businesses remain strong. The e-commerce boom and the need for effective logistics & infrastructure, will sustain demand, provided that small manufacturers get the support they need.

ABS - insight; https://www.abs.gov.au/statistics/economy/business-indicators/counts-australian-businesses-including-entries-and-exits/latest-release

In Closing

The future of office spaces and industrial units in Australia depends significantly on the health of small businesses. As these enterprises navigate their challenges, commercial real estate will be directly influenced.

Supporting small businesses and Australian made is crucial not just for the economy but also for maintaining the vibrancy and value of office and industrial properties. By fostering a supportive environment, communities can ensure that both small businesses and commercial real estate continue to thrive in the years ahead.

A contemporary industrial unit designed for modern manufacturing and logistics.