sheridanaustralia_1_220If you think all real estate markets are experiencing problems due to the economic downturn, then look Down Under.

A robust economy fueled by a strong mining industry, continued export demand from countries such as China, cautious lending policies and a scarcity of office and retail space in some cities is fueling continued real estate expansion in Australia.

“The broader Australian economy is strong,” explains Roy Sheargold, Chairman of the Sheargold Group, a property development company in Sydney and a ULI Foundation Trustee. “As a result, confidence in commercial real estate is re-emerging and vacancy rates are falling. This strength in the economy is largely a result of continued rapid growth in the export of natural resources which flows through to the rest of the economy.”

Immigration is also rising, Sheargold says, and the country’s population increase — combined with natural growth — has created strong demand for residential housing. “However, housing construction has fallen short of demand for many years,” Sheargold explains. “This is not so evident in the state of Victoria, where Melbourne is located, and Western Australia, whose capital city is Perth,” says Sheargold. “But in New South Wales — Australia’s most populous state which includes Sydney — the shortfall in housing is significant. And strong increases in population should also be positive for retail space.”

David Southon, Joint Managing Director of Charter Hall Group, a specialist property funds management and development company based in Sydney, notes the Australian economy has a comparatively low unemployment rate of 5.1%, gross domestic product (GDP) growth of 3.3% per year and solid consumer confidence.

“Property is cyclical and we believe the Australian property market is now at the bottom of the cycle as we are seeing not only an improvement in economic conditions but also a strengthening of underlying property fundamentals” he says.

Improving economic conditions are key to driving demand across property markets, says Southon, “and we are already seeing increased tenant enquiries and subsequent leasing activity across our office, industrial and retail portfolios in all markets in which we invest. This combined with a limited supply of new buildings, following project delays as a result of the financial crisis, has resulted in a stabilization of vacancy rates.”

Real estate activity remains healthy. One of the world’s largest retail developers, Westfield, is in the midst of a $600 million redevelopment in Sydney’s central business district that will integrate three existing sites on Pitt St. Mall into one iconic retail centre. The development, Westfield Sydney, is expected to be completed in stages through 2012 and includes the remodeling of the 100 Market Street office tower and a new 27-story office tower at 85 Castlereagh Street.

Also in Australia’s largest city, work has begun on Lend Lease’s Barangaroo South development, a 54-acre (22-ha) site including 5.3 million square feet (490,000 m2) of residential, commercial, retail and leisure space. Barangaroo South is forecast to contribute over $1.5 billion a year to the Sydney area economy and is predicted to become one of the greenest residential, leisure and business centers in the world.

Says Sheargold of the Sheargold Group: “Fundamental drivers such as increasing immigration, strong demand and a robust economy should remain in place throughout 2011 ensuring continuing robust real estate markets.”