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The commercial property sector looks to be in good shape for the December quarter according to the ANZ/Property Council Survey data released earlier this month.
Faith in the economy as a whole may not be as high as it was in the previous quarter, with the country's average expectation of economic growth slipping each quarter. However, although decreasing, the economic outlook is still positive.
Survey respondents in half of the country's eight states and territories expect a positive economic outlook for their state. NSW, VIC, QLD and NT were the ones with favourable growth expectations, while the rest of the country expected their states to decrease in economic productivity.
Expectations around capital growth
According to the survey, capital growth for offices for the next 12 months is expected to be positive, a swing in direction since the last quarter. This change in sentiment is largely buoyed by the NSW and VIC expectations of growth.
Industrial capital growth expectations are ahead of offices, but still down from the previous quarter. Projected growth in retail and shopping centres across some states has experienced a big upswing for the year, which is quite possibly a reflection of the silly season ahead.
Only one state, NT, perceived negative capital gains for the December quarter. TAS was down from last quarter but still positive, and ACT jumped massively from their three-quarter negative streak to seeing an encouraging time ahead for retail spaces.
Retirement living and hotel capital growth both experienced big boosts in confidence across all states.
Commercial construction
If you're looking at adding some Australian commercial real estate to your profile but can't find anything that tickles your fancy, don't worry, there's more coming!
Trends from the survey show construction activity across all commercial sectors is expected to increase, with retirement living, retail and office space receiving the biggest jumps in confidence. These may be key areas to watch, with activity in retirement living projected to outpace even residential construction, which has itself seen a resurgence of late.
Moving forward
A lot of the commercial success in recent months has been driven by local and foreign investment. Australian real assets have become a desirable investment around the globe, and fostering this interest in our property sector and economy can only lead to increased growth and confidence in the sector.
In its recent Financial Stability Review, the Reserve Bank of Australia noted: "In particular, in the global environment of low interest rates and the consequent search for yield, the high yield on Australian commercial property has attracted strong investor demand, with a sharp increase in the total value of office, retail and industrial property transactions over the past two years."
Commercial property as a whole experienced a good increase in sentiment despite soft market fundamentals, thanks in large part to high levels of investment. The (slowly) weakening dollar is also an aspect that should serve to increase investment in Australia's commercial sector.
