RBA says finance availability improving for office developments
The RBA says finance conditions are improving for developers seeking funding for new office projects.
“The bank’s liaison suggests that lenders’ appetite for funding new office projects has improved a little over the past year, though funding conditions vary considerably across developers,” the RBA writes in its August monetary policy statement.
It notes that tenant pre-commitment requirements are contributing to funding constraints.
The RBA’s assertion that lenders appetites for offices is improving follows the Property Council reporting an overall tightening of office vacancy rates nationally over the first six months of the year, with demand for premium office space rising.
The RBA notes an improvement in financing conditions alongside an overall uptick in conditions for commercial property and a rosier outlook.
“After a period of rising vacancy rates and falling property values and rents, conditions in the commercial property sector have improved somewhat over the past year,” the RBA says.
The RBA notes the drop in office vacancy rates in Perth and Brisbane but says these are still much higher than in 2007 when these markets were “exceptionally tight”.
“A further improvement is expected by most observers over the period ahead, with solid demand and only moderate additions to supply over the next few years leading to gradually declining vacancy rates and rising rents.”
It concludes its review of offices by saying that based on the current pipeline of projects in the early stages of planning, “supply is projected to grow at a faster pace by mid-decade, although the extent and timing will depend on the outcomes of a number of proposed large developments”.
The Reserve Bank also notes the positive outlook for industrial property uncovered by recent research “reflecting expected solid demand and, in some areas, modest near-term growth in supply”.
