Commercial property spill-over: HSBC's Paul Bloxham
Low global and local interest rates have spurred a significant rise in commercial property prices in Australia in recent years according to HSBCE seniro economist Paul Bloxham.
In his 2017 forecast he says his has been partly driven by a global ‘search for yield’.
"Commercial property prices have risen across office, industrial and retail commercial property," he said.
"The rise in commercial property prices has significantly outpaced rents, pushing yields lower, and driving them to converge towards global commercial property yields, which are still lower than those in Australia.
"However, much like the housing market, the trends vary across the major cities.
In Sydney and Melbourne, where economic conditions have been stronger, office vacancy rates have edged lower, supporting prices and rents.
"However, yields have still fallen as growth in commercial property prices outpaced growth in rents. In Perth, Brisbane and Adelaide, where economic conditions have been weaker, office vacancy rates have risen. This has seen rents fall, while office prices have tracked broadly sideways, which has also weighed on commercial property yields.
"The recent lift in global interest rates could take some of the support away from commercial property prices. Oversupply of commercial properties in Brisbane and Perth, which have seen a sharp rise in vacancy rates, could also weigh on apartment markets in those cities, given the substitutability across these types of properties."
