Conditions remain "difficult" in commercial property sector: RBA

The difficult operating environment being faced by some businesses is also evident in the commercial property sector, the RBA has acknowledged in its latest Financial Stability Review.

Buried deep within the hefty bi-annual report, the RBA also notes that the banking system has “sizeable exposures” to commercial property.

“The pace of the recovery in commercial property rents and prices slowed in 2012, and conditions generally remain weaker than prior to the crisis across the main market segments,” says the RBA.

“In the CBD office market, where conditions had improved the most over the past few years, rents have fallen in recent quarters and vacancy rates have begun to increase again.

“The increase in office vacancy rates over the second half of 2012 was driven by weaker tenant demand across most capital cities, and followed large supply additions in the first half, particularly in Perth and Brisbane.

“While there is some new supply in the pipeline, private non-residential building activity has been fairly weak compared with the run-up prior to the financial crisis, and the outlook for construction in the near term is subdued: non-residential building approvals in the second half of 2012 were below their average level since the early 1990s as a per cent of GDP, and survey measures of investment intentions are weak,” says the RBA.