Commercial property sentiment at record high

The Australian commercial property market sentiment hit a new high in Q4 2015, according to the NAB Q4 2015 Commercial Property Survey.

Overall, the index rose to +17 in Q4, up from +10 in Q3. This is the highest level the index has reached since it began in 2010 but the headline index continues to mask big differences across both property sectors and states.

The great divide

Nowhere are the differences between sectors more stark than when comparing the optimism in CBD hotels (index of +50) with the relative doom and gloom of industrial markets (index of -2).

The contrast is also staggering when comparing sentiment across the states. Western Australia, the only state with negative sentiment, is in stark contrast with the Eastern Seaboard, as evidenced in the graph below. Indeed, New South Wales and Victoria were the most optimistic states, and Queensland is expected to be the quiet achiever over the next two years.

NAB commercial property index by state

Sector performance

Sector-wise, the office market continued to strengthen in Q4, rising to +22 – its highest level since early 2011. This growth is heavily underpinned by New South Wales and Victoria, the only states with positive sentiment. Queensland and South Australia /Northern Territory both remain neutral, and are expected to stay that way for at least the next twelve months.

NAB office property index by state

The industrial market recorded the weakest sentiment in Q4, driven by doom and gloom in South Australia /Northern Territory and Western Australia. Interestingly, Queensland lags behind only New South Wales for capital value expectations, and confidence is expected to skyrocket over the next two years in anticipation of a market that will be “somewhat under-supplied” within the next three years. (Click here to read our article on Brisbane industrial property’s looming transformation from poor cousin to national powerhouse.)

NAB industrial property index by state

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All sources for this article were taken from the NAB Q4 2015 Commercial Property Survey.