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The commercial market appears to be responding to the factors of higher inflation and interest rates, sending confidence into decline, according to one quarterly report.
NAB’s Commercial Property Index was shown to have dropped into pessimistic territory over the second quarter of 2022, sitting at -1 point, driven largely by drops in the office market.
The big four bank’s index may have seen office sentiment turn positive in Q1, sitting at 10 points at the start of the year, but it has since fallen back into negative figures, falling to -14 in Q2.
Retail sentiment also pushed the index down, dropping to -17 points over the three-month period. Central business district hotels, meanwhile, remained neutral, even as occupancy appeared to significantly bounce back, with 71.7 per cent occupancy, up from 58.3 per cent at the start of the year.
The industrial sector single-handedly buoyed the numbers, remaining at 57 points in the positive, as it was during the previous quarter.
Across the country, market sentiment fell back in all states except for Queensland, which was also the state with the highest level of positivity regarding the sector.
The sentiment was overall neutral in NSW, South Australia and the Northern Territory, and in negative territory in Western Australia and Victoria.
As with the overall numbers, office sentiment appeared to have the greatest impact on statewide confidence, with a very negative outlook reported for Western Australia and Victoria in the next 12 months, and remaining negative in Victoria over the next two years.
Rental growth for offices is unsurprisingly expected to lose steam or even fall over the next year or two, with NAB’s 24-month projection expecting them to fluctuate in the range of -0.3 per cent to 0.5 per cent. Retail rents are also projected to fall by -0.9 per cent to -0.3 per cent.
Rising interest rates have been putting pressure on investors, with more property professionals reporting that it is now harder to obtain debt or equity.
It follows that the number of developers planning to start new works within the next six months is in rapid decline, hitting a three-year low of 38 per cent in Q2. Residential, office and retail all recorded below-average numbers for new starts. Again, industrial delivers a boost to the sector here, with new starts still above average.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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