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Australia Real Estate Report Q1 2011
Business Monitor International, Dec 2010, Pages: 68
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.
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 largely 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, we envisage that rental yields will generally move sideways over the next four years or so.
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