Q1 Results Australia Commercial Property Market Better Than Expected

A sigh of relief looms in the air as the NAB quarterly Australian commercial property survey for Q1 2015 reports positive signs. NAB’s commercial property index climbs to an unexpected 4-year high. Showing +6 points NAB’s commercial property index sits it’s average (-5 points) displaying a sense of comfort.

Not all markets are experiencing the same level of comfort as the state’s very significantly, NAB Chief Economist Alan Oster: “The lift in sentiment was most notable in CBD hotels after a surprising fall in Q4, but also improved in office and industrial markets. Sentiment was a touch weaker in retail, but is still higher than the broader market average.”

NSW and Victoria are definitely seeing a positive upside for commercial property while WA is the least optimistic by far. Tourism is also experiencing some optimism and confidence in CBD hotels is getting stronger.

With the AUD lowering there is a strong demand for international travelers which in turn is keeping hotel occupancy rates high and is adding to the positive outlook. Office markets are also being affected and are holding a similar pattern.

NSW and Victoria are gaining momentum, while WA and Queensland are still experiencing  difficulties. Mr.Oster says it best “In contrast, expectations in industrial markets have weakened, mirroring a pullback in business confidence also seen in mining and manufacturing firms in our latest Quarterly Business Survey”.

Capital growth over the next 1 – 2 years looks optimistic and shows positive trends especially for CBD hotels. The leasing market on the other hand will remain difficult with rents falling in all markets in Q1. The key to the Q1 survey is that confidence is climbing amongst developers and consumers; 58% of developers said they were planning on starting new projects within 6 months. High hopes remain for keeping confidence levels up over the next 2 years.