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Australia Real Estate Report Q4 2010
Business Monitor International, Sep 2010, Pages: 70
Although Australia’s economy rode out the global financial crisis fairly well, 2009 and 2010 have been difficult years for most protagonists in the country’s commercial Real Estate sector.
Our in-country sources in Sydney and Melbourne reported that rental rates for offices and retail property tracked sideways during 2009. By contrast, rental rates in these sub-sectors fell quite sharply in both Perth and Brisbane. However, across the country as a whole industrial rates held up fairly well. Since the beginning of 2010, rental rates in the Sydney industrial sub-sector have slipped by over 10%. In general, though, rents have been stable – and are generally expected to remain so.
This lacklustre outcome reflects a generally low level of consumer confidence which, in turn, has had an impact on retail sales and business confidence. Since the global financial crisis, a key dynamic in the Australian economy – in spite of an overall performance that compares favourably with that of other developed countries – has been the deleveraging of the household sector. None of our sources expect that this will change any time soon. While Australian households look to increase savings and/or to pay down debt, the ability of commercial tenants to sustain higher rental rates will be limited. This is the reason why most, rental rates appear set to rise by single-digit amounts over the next year or so.
Generally, supply of and demand for commercial real estate is in balance across the four cities and the three main sub-sectors. This points to discipline on the part of lenders and institutional investors in the years prior to 2008. However, it does not overcome the fundamental problem of the lack of consumer confidence. Looking forward, the authors envisage that rental yields will generally move sideways over the next four years or so.
Key Features of This Report
This is the latest edition of a new series of industry reports that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. The questions that the report seeks to answer for each country remain as follows: what are the main issues that will matter to actors in and around real estate development in the country concerned, both over the long and the short term? What are the main constraints that they face? What are the key insights that one garners when one compares the real estate sector of the country concerned with its peers in other countries?
In Q3 the authors introduced a very substantial new improvement to the reports. They incorporated data and qualitative observations provided by commercial real estate agents operating in the countries surveyed. As a result they gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. They also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report. In Q4, they have incorporated a lot of new data in relation to rents and yields in 2010. They gained this data by way of a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from their sources has caused them to make significant revisions to their forecasts for 2011-2014. They asked their sources to indicate what growth in rents is likely for 2011. They explain their answers in the Industry Forecast Scenario.
Australia Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Australia's Real Estate industry.
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