CONFIDENCE in the commercial property market has continued strengthen as the office and retail sectors recover.
The latest Australian Property Institute’s Property Directions Survey found that commercial property in Sydney and Melbourne are witnessing an upswing whilst Brisbane has reached the bottom of the cycle.
Retail property has also rebounded and poised for a recovery.
But at the same time, respondents believe industrial property is lagging almost 12 months behind in all three cities, where the sector is reaching the bottom of the cycle.
Respondents forecast that in the 12 months ahead, the commercial and retail segments in Sydney and Melbourne will continue to improve further along the recovery and Brisbane will start the upswing.
And this time next year, industrial property in the three cities will finally commenced the upswing.
In two year’s time, respondents see all of the property classes – commercial, industrial, retail moving further along the cycle.
API NSW president Robert Hecek said the improved outlook has bolstered sentiment compared to the last survey in September 2009 where 32% of respondents said the non-residential sector will “very unlikely” outperform the equity market.
In the latest April 2010 survey, only 10% of respondents still hold that view for the next 12 months. At the same time, 20% of respondents believe the non-residential sector will likely outperform the equities market compared to just 3% in the previous survey.
And sentiment for the non-residential property sector to outperform equities improves significantly over the medium and long term.
In three years out and five years, respondents who hold that view were 33% and 40% respectively.
Hecek said this sentiment is consistent with the significant improvement in sentiment for listed and unlisted property trusts, which hold a majority of commercial real estate assets in Australia.
“A large majority – 84% are predicting moderate investment growth for listed domestic property trusts – a massive increase on only 10% who predicted an increase 12 months ago. A smaller majority – but still significant, 67% are predicting moderate investment growth for unlisted domestic property trusts. The majority of respondents see no investment change or a moderate decline for both listed and unlisted property trusts,” he added.
Hecek said overall sentiment is better from 12 months ago, with respondents seeing either positive improvements or lower declines in market values and rents for commercial, industrial and retail property in all CBDs in the three cities of Sydney, Melbourne and Brisbane.
API’s Victorian president Steve Simpson noted that the largest growth projections for market and rental levels above CPI over the next 12 months are for the Melbourne CBD.
He added that this is because respondents are either seeing positive improvements or much lower declines in market values and rents for the commercial, industrial and retail sectors.
Hecek said respondents believe market and rental values for retail property in the three CBDs of Sydney, Melbourne and Brisbane are increasing.
“This is a contrast to the September survey, where respondents predicted market values and rents would fall for commercial, industrial and retail property in all the three cities – Sydney, Melbourne and Brisbane.
“This improvement in sentiment is another reflection of the growing confidence and strength of the property market in Australia,” Hecek concluded.
Australian Property Journal
