Commercial property prospects take hit, NAB says
The country’s commercial property executives are becoming more bearish, with a National Australia Bank survey showing sentiment has fallen to its lowest level in two years.
The NAB commercial property survey for the second quarter of the current calendar year shows the index reading dropped seven points to five.
However, the report shows the retail commercial property market – essentially shopping centres – performing strongly, with leasing and rental rates growing solidly in the past three months.
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The best performing states are NSW and Victoria, where sentiment rose during the quarter.
NAB chief economist Alan Oster says the CBD hotel market is the worst-performing sector in the national market.
Australia’s shopping centre market has continued to perform strongly.
Capital growth was expected to be the strongest in the retail property market with forecasts that prices will rise by 1.5% this year and 1.7% in two years. However, CBD hotel construction costs are projected to fall by 2.2% and then 0.7% over the next two years.
“This was a strong quarter for capital growth in the retail property sector, with respondents expecting retail to grow 1.5% in the next year,” Oster says.
“As a result, sentiment in the retail commercial property sector rose to its highest level in six years.
“However, sentiment from respondents was lower across all other sectors, particularly in CBD hotels, which was the weakest sector overall.”
“Looking towards the future, confidence levels remain broadly unchanged over the next one to two years across all markets.”
The CBD hotel market is Australia’s worst-performing sector.
The NAB survey shows one in two developers plan to begin commercial and residential property projects within six months.
“Developers have also reported a further deterioration in their debt and equity funding situations, which is expected to continue in the next six months,” Oster says.
“This is coupled with respondents reporting the average pre-commitment percentage requirement for developments increased for the fifth straight quarter.”
The study also reveals that sentiment remains weakest in Brisbane and Adelaide, which have the highest commercial vacancy rates in the nation.
This article originally appeared on www.theaustralian.com.au/property.
