Commercial property sentiment hits new high in 2017 Q1: NAB Survey

It’s not just the residential property market that is showing strong growth, sentiment in the commercial property market too rose to a new high in the first quarter of 2017, with offices taking the lead, according to the latest NAB Commercial Property Survey Q1 2017.

The Commercial Property Index climbed 6 points to +27, with around 250 panellists participating in the Q1 2017 Survey, said NAB.

NAB Group Chief Economist Alan Oster said the improvement was reflected in a much higher sentiment for office property while industrial grew modestly.  

Sentiment in the CBD hotels sector was lower, but still very solid and highest across all sectors, while sentiment in retail property markets was unchanged, the survey said.

“Confidence levels also lifted in Office, Industrial and CBD hotels markets, but fell for retail property as household consumption continues to slow to a moderate pace across most states and territories,” Oster said.

“By state, sentiment is still highest in NSW, where it reached a new survey high, followed by Victoria. It rallied in WA but is still very weak and fell in SA/NT and QLD.” 

The survey found that prospects for capital growth in next 1-2 years improved for CBD hotels, office and industrial property, but were unchanged for retail.

Other findings include the expectation that office property will continue to provide the best income returns in the next 1-2 years, with solid growth in NSW and Victoria continuing amid tightening vacancies in both states. Rental growth is expected to remain very weak in WA, reflecting expectations for elevated vacancy rates and oversupply.

Just over one in two developers expect to start new projects in the next six months, with around six in 10 projects looking to develop into residential projects, says the survey.

Funding conditions are however now considered to be harder than at any time since the final quarter of 2011, particularly for debt borrowing, and are expected to become even harder in the next 6-12 months.

More than one in four (28%) developers are looking to source more capital in the next next months, the survey said. But getting funding is now considered to be harder than at any time since Q4’11. 

The survey was first launched in 2010 and is one of the leading surveys of market sentiment in the commercial property space. Its panel consists of real estate agents, fund managers, developers and investors.