Commercial property sentiment slips for second straight quarter: NAB
Confidence in the Australian commercial real estate market slipped in the third quarter, pulled down by weakening sentiment on offices and industrial property, new figures show.
Overall, sentiment dropped for the second consecutive quarter – down five points from previous three months to +18 – but was still above the long-term average, according to the National Australia Bank’s Commercial Property Survey for the September quarter.
NAB Group chief economist Alan Oster attributed the fall to lower confidence in NSW and Victoria.
“By state, overall sentiment was dragged down by NSW and Victoria, but they continue to outperform,” he said.
“Sentiment rose in Western Australia and South Australia/Northern Territory, but is still very weak, with Queensland steady.”
Sentiment towards the office market fell for the first time since the first quarter of 2016, by 11 points to +28, while it declined in industrial property by 15 points to +2.
Optimism was the highest for CBD hotels, increasing nine points to +30, and the retail sector also rebounded, with Queensland leading the way.
Although NSW and Victoria, where confidence was backtracking, are still the most buoyant states, all sectors of Queensland saw uplift.
The 290 survey panellists had higher expectations for capital growth in all sectors, with CBD hotels and offices trumping the rest.
Queensland is also expected to provide the best income returns for industrial property.
Office property was projected to have the strongest rental returns in the next two years, especially in Victoria and NSW, while little growth is anticipated for retail rents in all states.
The national office vacancy rate remained at 9.7 per cent, with Victoria and NSW reporting the tightest markets due to strong tenant demand and take-up. Vacancies are predicted to edge down further in the next two years, but supply is still high in Western Australia.
Residential projects were losing popularity among developers, with the number targeting housing dropping to 51 per cent, from 64 per cent this time last year.
“This lends further support to NAB’s view that the dwelling construction cycle may have peaked,” Mr Oster said.
Developers will continue to have difficulty accessing debt and equity finding for the next 12 months, the panellists said.
