This article is from the Australian Property Journal archive
COMMERCIAL property sentiment is in negative territory for the first time in four years, according to NAB’s quarterly survey, following drop-offs in the retail and hotel sectors, while confidence is negative in NSW for the first time in the series.
The NAB commercial property index fell 11 points to -2.
Retail took a heavy fall of 26 points to -44.
“This will have been influenced by the slowing economic growth momentum into the March quarter, with the situation in discretionary retail and consumption more generally deteriorating even further,” NAB chief economist, Alan Oster said.
CBD hotels was down from neutral to -13, its negative return since mid-2016.
Office and industrial property sentiment softened to 23 and 15 respectively, but both remain well above their long-term averages. While confidence fell below average for both (30 in one year and 37 in two, and 27 and 36), the sectors are expected to to outperform by a large margin.
Retail confidence is down across the country, to -54 for one year and -45 in two years.
Confidence fell deeper into negative territory in the CBD hotels due to weakening expectations for both capital and RevPar growth in the next one-to-two years.
Sentiment moderated sharply in Victoria (23 to 5), New South Wales (25 to 1) and Queensland (8 to 1), and rose in South Australia/Northern Territory (-26 to -11) and was steady in Western Australia (-35).
Property professionals in Victoria are the most confident about commercial property over the next year, at 6, but Queensland and Western Australia will lead the way in two years’ time, with readings of 18 and 17 compared to Victoria’s 15.
NSW is down at -7 in two years due to a fall in retail, and confidence for one year across SA/NT will fall before a small uplift.
Capital growth expectations for the next year are strongest for office, headed by Queensland and WA, while industrial will overtake retail as best performer in 2 years’ time, although capital returns for retail sector will remain very weak over the next one-to-two years, and values are expected to fall in all states.
Office property is expected to lead income returns in the next one-to-two years, up by 1,1% and 1.6%, with rents to grow fastest in Victoria next year and Queensland in two years’ time. Industrial rents will also grow (0.9% and 1.4%), led by Victoria. All states are expected to see falls in retail rents, with an average of 2.7% and 2.9%.
Developers expecting to start new works over next six months fell to 41%, well below average, and the number of developers targeting residential projects also remains below average.
Property professionals expect funding conditions to worsen over the next three-to-six months.
Australian Property Journal
