Retail Property Sentiment Takes Sharp Dive

Overall sentiment in the commercial market has faded, and retail sentiment in the property sector has turned negative for the first time since 2014.

The less-than-stellar results came from the quarterly National Australia Bank Commercial Property Survey.

In contrast, sentiment in the CBD hotels sector soared thanks to strong growth in tourism and occupancy, rising 75 points in the 2017 fourth quarter.

Industrial sentiment also increased amid reports of strong warehousing and logistics activity linked to growth in online retail and e-commerce thanks to the likes of retail giant Amazon launching in Australia.

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Industrial sentiment rose to 18 points from two in the previous quarter.

While sentiment in the office sector eased further it is still out performing and above the longer-term average.

NAB's chief economist Alan Oster says the fall in sentiment in the retail property sector is not surprising.

“Given NAB’s own outlook for wages suggests that any improvement in consumer spending will be slow, especially if wealth effects have an impact as house prices ease,” Oster said.

Retail sentiment dropped to -7 points in the fourth quarter of 2017 compared with positive 12 points in the previous quarter, the NAB Commercial Property Index reveals.

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State sentiment

Property experts in all states were less confident about overall commercial property markets in the next one to two years.

Sentiment was largely unchanged and strongest in New South Wales and Queensland, while Western Australia, South Australia and the Northern Territory were the least confident.

The survey also revealed that property developers were more hesitant about entering the market in the fourth quarter, reflecting concerns about over-supply in segments such as high density apartments.

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Across Australia, the number of developers expecting to start new building works in the next six months fell to 47 per cent, below its long-term average of 51 per cent.

“Property experts are also telling us that debt and equity funding is still difficult to obtain,” Oster says.

According to the NAB survey, property experts don’t expect their lending terms to improve over the next 6-12 months.

The survey consisted of 300 property professionals.