Aussie Commercial Property Index Falls in June Quarter

Posted on 12 August, 2012 by Jodee Redmond

National Australia Bank’s commercial property index reported a drop to minus 16 in the second quarter from minus 8 in the first quarter of 2012. These figures represent the lowest figures since the series began keeping records. Continuing concerns about European financial stability and a weaker retail market have combined to drive down confidence in this sector.

According to the NAB’s chief economist, Alan Oster, the biggest barrier commercial property firms are currently facing is consumer confidence. Oster went on to state, “Economic and financial market volatility have again emerged as major concerns as confidence was likely eroded by recent turmoil in Greece and Spain.”

Industrial property and retail professionals were among the most pessimistic in the index, which was more than likely due to the difficulty facing these two sectors of the economy. Consumer demand at traditional retail stores has been sporadic over the past several years, fuelled by shaky consumer confidence and competition from foreign retailers. The strong performance of the Australian dollar is also playing a role in the lower retail numbers as well.

The NAB survey results also pointed to a downturn in the country’s office retail subindex, which dropped to five in the second quarter from 12 in the first quarter of the year. The index, measuring activity for the CBD hotels sector, dropped by 66 per cent during the same time, moving from 57 to 19.

According to the report, the retail market was “somewhat oversupplied,” while the national office and industrial property markets were assessed as being neutral in the June quarter. The news isn’t all pessimistic, though: an undersupply is predicted in the office market over the next three years and the industrial market is expected to follow suit in the next five years as the Australian economy improves.

The NAB survey of conditions was compiled from responses gathered from 300 fund managers, investors, developers, real estate agents, and managers.




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