Commercial Market Confidence Slowly Returns
Commercial property sentiment has improved for a consecutive quarter.
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While Australia has fared better than most countries in its response to COVID-19, the commercial market has taken a hit.
The recovery from the pandemic amplified recession is now, slowly, starting to find the commercial property market sentiment according to NAB’s quarterly commercial sentiment survey which – through its Commercial Property Index – saw expectations for capital values and rents lift to a still weak -35 pts, well below the overage of 0 pts.
Overall sentiment towards the commercial property market lifted in all states in Q4, although still negative, ranging from -64 pts in VIC to -11 pts in QLD and WA. Market conditions are expected to remain negative in all states in the next 12 months except in WA (+8 pts), with VIC (-51 pts) the least confident.
Longer-term confidence however looks more positive in most states, except VIC (-16 pts) and NSW (-5 pts), with WA (+34 pts) highest.
Sentiment is not consistent across all commercial sectors, CBD hotels registered a score of -64 pts, Retail -58pts and Office -41pts, the industrial sentiment rose sharply (-25 pts) pointing to demand for online retail and requirements for warehousing and logistic spaces as the cause.
Expectations for a stronger near-term recovery in economic activity has boosted overall confidence levels in commercial property markets with an expectation to measure +2 pts in two-years.
On the development front, an above average 54% of property developers plan to start new works in the short-term (next 6 months), up from 39% in Q3.
Further, the rental outlook across commercial markets is less decisive, with Retail (-3.9% & -1.8%) and Office (-2.7% & -1.4%), with the outlook weakest in the Eastern seaboard states. The outlook for Industrial rents (1.4% & 2.1%) has however improved sharply.
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In signs that confidence is returning to the Australian property market, the combined capitals recorded their highest preliminary clearance rates since April last year, CoreLogic reports.
More than 2,290 homes went to market across capital cities last weekend with early data revealing a 71 percent clearance rate. This compares with a revised clearance rate of 64.2 percent last week. It marks the second busiest auction week to date this year.
Melbourne led the way, with 1,122 homes taken to auction. Of the 916 results collected so far, 73.5 percent were successful. It was a similar story in Sydney, with 791 homes to go under the hammer. Preliminary results indicate a clearance rate of 71.5 percent.
The smaller capitals including Brisbane, Adelaide and Canberra all experienced higher clearance rates week on week, with Adelaide out in front at 78.6 percent. It was a less spectacular result in Canberra, with a 59 percent clearance rate and in Brisbane at 56 percent.
In Perth, just three of the 13 auctions tallied so far were successful.
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