Business confidence brightens commercial property outlook

The current level of business confidence will continue to have a positive effect on Australia’s commercial property market in 2016, according to Colliers International.

John Kenny, CEO of Colliers’ Australian and New Zealand operations, said the sustained increase in business confidence is having a positive impact across the property sector, and this optimism is starting to flow through several of the group’s occupier markets as businesses become more confident in leasing office space.

Colliers noted that the Sydney CBD office market has experienced improving conditions since early 2015, with a significant decline in vacancy over the year.

“This run is expected to continue to spread to other markets with Melbourne CBD offices, Sydney industrial and national neighbourhood and large format centres likely to experience particularly strong demand conditions in the year ahead,” the group said.

But despite this return of occupiers across the country, Colliers said there will still be pockets where this does not lead to rental growth.

“In some markets, elevated levels of supply are offsetting the strong growth in tenant demand,” it said.

“Similarly, those locations impacted by parts of the economy experiencing a slowdown, such as those markets dependent on the mining sector, will be the underperformers in 2016.”

Furthermore, Australian investors are now increasingly moving offshore, spending approximately $5 billion overseas in 2015.

Colliers said this is more than double the 2014 level, but significantly lower than the almost $28 billion in 2007 when Australian investors were the third-highest offshore investors in the world.

“Very few Australian groups are entering international markets at this stage, with around 90 per cent of [last year’s] offshore acquisition activity made by two groups – Australian Super and Lend Lease,” Colliers International’s national director of research, Nerida Conisbee, said.

This growth in Australian groups investing offshore will continue in 2016, according to the group, but the types of investors in the market will be different from the previous cycle.

[Related: Commercial property investment at record levels]

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