Office confidence high as retail slides: NAB survey
Property executives are pinning their hopes on the country’s resurgent office markets with National Australia Bank’s Commercial Property Index showing office property scored the best results for future capital and rental growth.
Overall sentiment among property professionals strengthened slightly in the final quarter of 2018, with the index rising one point to plus nine.
NAB chief economist Alan Oster says the office market replaced industrial property as the leading market sector for confidence.
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“Retail property market sentiment improved a little, but was still heavily negative and the weakest sector overall as business conditions in the retail industry continue to lag,” Oster says.
In contrast, sentiment in the buoyant CBD hotels sector fell to its lowest level since mid-2016. Confidence in the industrial market also softened, but continued to pull ahead of the broader market.
The overall confidence levels in the commercial property market remains weak, according to the survey of 300 property professionals, and well below average levels of the index. Retail property is the softest, NAB says.
“This result does not surprise us as we also expect the headwinds of slow income growth, high debt levels and weaker growth in household wealth to weigh on consumption over the coming years,” Oster says.
The national vacancy rate for office space fell to 7.8% in the final quarter of last year, with the lowest levels in Victoria where only 4.3% of office space was empty followed by NSW at 4.9%.
Property professionals say accessing credit is harder than at any time since the survey began in 2010.
Equity funding is also tougher than it has been since the index started, and property professionals expect debt and equity-funding conditions to worsen over the next six months.
Developers lost confidence in the final quarter of last year with only 23% saying they planned to start new projects in the next 6-12 months, down from 32 per cent in the previous quarter.
This article originally appeared on www.theaustralian.com.au/property.
