Commercial property sentiment at highest since 2010: NAB

Commercial property market sentiment is at a high underscored by the strong performance of CBD hotels, according to NAB’s industry index figures which reached a record level since the survey began in 2010.

NAB’s Commercial Property Index, part of its Commercial Property Survey Q4 2016, rose 5 points to +21 - its highest level since the survey began in early 2010. For the Q4 survey, 250 panellists participated. 

The bank’s chief economist Alan Oster said the jump was largely due to big gains in CBD hotels and small gains in the office sector. 

“While we continue to see an uneven performance across sectors, the performance of CBD hotels has more than offset the lower sentiment that we’re seeing in both retail and industrial markets,” he said.

“Confidence has also wavered in all sectors, except CBD hotels where it rose sharply among very strong expectations for occupancy, capital and revenue per available room (revPar) growth. 

Confidence and sentiment was much stronger in New South Wales and Victorian, while Queensland showed some improvement, but WA still very weak, he said. 

The latest survey found that prospects for capital growth in next 1-2 years improved, and are best, for CBD hotels.

Other sectors had scaled back but still growing. Retail is being led by NSW and Victoria, office by NSW and industrial by NSW and Queensland. 

Other findings include the expectation that office property will provide the best income returns in the next 1-2 years, led by very strong growth in NSW. Retail and industrial rents are predicted to grow modestly in all states except WA. 

Overall office vacancy fell a little as a small tightening from very high levels in QLD & SA/NT offset Survey high vacancy in WA and small increases in NSW & VIC (but from low levels). Vacancy in office and industrial markets are set to fall in the next 1-2 years and rise in Retail.