CBD hotels top commercial property sector: NAB Commercial Property Survey
CBD hotels are the most promising assets in the commercial property sector, according to the latest NAB Commercial Property Survey.
CBD hotels helped boost the NAB Commercial Property Index by 4 points in the first quarter of the year, higher than its long-term average of a rise of 3 points.
The big driver was on the back of growing tourism and favourable global economic conditions.
The other strong performer in the commercial property market was the industrial property sector, because of the growing demand for warehousing and distribution centres.
Survey participants said the office market would remain strong, particularly on the eastern seaboard where business conditions and employment growth are solid and vacancy levels remain low and tight.
Indeed, rental growth is expected to be fastest for industrial and office commercial property in the next one to two years.
Survey participants expect New South Wales and Victoria to outperform the market. The retail property sector had the weakest outlook with a negative index for the first time since 2013.
This reflected weakening household spending in 2018 and 2019.
While sentiment for NSW and South Australia and Northern Territory rose, it remained unchanged in Victoria.
However, sentiment was hitting lows in Western Australia with little confidence from survey participants. That said, participants expect rents to recover in WA, especially in the office sector.
Australian Real Estate Investment Trusts in retail are expected to hold their portfolio with some acquisitions.
"Retail acquisition strategies are expected to be driven by concerns over the economy and consumer confidence, opportunities to acquire traditionally tightly held assets, concerns over online retail and entry of new players (like Amazon), all time high cap rates and concerns over changing consumer spending patterns," the survey says.
"Most experts operating in the retail property segment also think these changes will impact landlords negatively, especially large neighbourhood, sub-regional and regional areas."
Leon Gettler - 19th April 2018
