The outlook for the commercial property sector has turned gloomier, with a recovery in the retail property sector at least two years away, according to the latest sentiment survey by NAB.
Across all sectors the index hits new low of -19 points in the third quarter of 2012 “as the domestic economy passes through a soft patch, with business conditions weaker and forward indicators concerning”.
The outlook remains strongest for CBD hotels, with capital values expected to rise 3.8% over the next two years, followed by industrial assets (up 2.8%) and offices (up 1.8%).Click to enlarge
Retail property participants in the quarterly survey remain the least optimistic and expect capital values to fall 1% over the next 12 months before improving be down 0.2% over the next two years.
Results of the survey suggest that the retail property market could start turning the corner around September 2014, with the pace of decline in rents and capital values slowing over the next two years.
Rents aren’t expected to offer much comfort over this period, falling 2.1% over the next year before improving to be down 0.8% over the next two years.
Over the next two years, the poorest retail property outlook is in Victoria, where capital values are forecast to fall 1.6%.
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The outlook is not much better for NSW retail property, with values forecast to fall marginally over the next two years (-0.7%) with rents down 1.5%.
The outlook for capital values and rents is better in the resource states of WA and Queensland as well as in the combined Northern Territory/ South Australia market.
The quarterly survey is based on the responses of around 250 commercial property participants including real estate agents, property developers, fund managers, owners and investors.
According to respondents, consumer confidence is still the biggest challenge facing property firms but concerns over government regulation/red-tape and stock levels also a growing challenge.
Business costs are expected to have the biggest impact on commercial property businesses over next year with interest rates and global economic volatility also a major concern.