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The third quarter of 2022 has seen sentiment for Australian commercial property decrease rapidly, according to a new report.
Several financial factors, including soaring inflation and subsequent interest rate increases, have culminated in this sentimental dip, as outlined in the Royal Institution of Chartered Surveyors (RICS) Global Commercial Property Monitor.
Having begun the quarter at +1, Australia’s Commercial Property Sentiment Index (CPSI) slid to -5 in 2022’s penultimate quarter as commercial tenant demand across all three subsectors — office, industrial, and retail — dipped, reflecting a general lowering in investor confidence across the commercial property sector.
Additionally, the Investment Sentiment Index (ISI), which looks at investment inquiries, capital value expectations, and supply of properties, also reported an increase in negative sentiment as it fell from -2 at the start of Q2 to -10 presently.
Mel Rohan, senior public affairs officer at RICS, explained that the survey’s latest quarterly results “reflect the overall pressures on the Australian economy as it transitions to a post-COVID world with tightening monetary policy and significant international economic pressures”.
“It underlines the importance of carefully balancing inflation and interest rates into the future.
“Interestingly, in terms of the work-from-home trend, the overall sentiment indicates that investment flows over the year ahead will only be slightly impacted, or there will be no impact at all,” she added.
Indeed, the report found that “20 per cent of respondents do not foresee some scaling back in the office footprint over the year ahead, with around 50 per cent suggesting it is likely to amount to up to 10 per cent of the existing estates”.
Crucially, when questioned about how investment flows will be impacted by hybrid working arrangements, almost half (45 per cent) of respondents in all three categories — central business district, suburban centres, and regional offices — were modestly negative.
Last month, the Property Council of Australia (PCA) released its office occupancy survey for September, which found that every Australian capital city outside of Canberra had experienced an uptick in workers returning to the office, led by Adelaide’s occupancy rate of 78 per cent.
However, it did note that these figures did not remain consistent throughout the month, with the disparity between occupancy peak and low days remaining large through the 10th month of the year, notably in cities like Melbourne, where occupancy bottomed out at 25 per cent.
In light of this, the RICS survey found approximately 70 per cent of Australian respondents reported office spaces being repurposed, slightly higher than the two-thirds of global respondents who agreed.
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