Expect a mixed bag when it comes to market growth across Australia for the remainder of this year and into 2018.
That’s the message from experts who’ve forecast steady economic growth for the nation, with major cities on the east coast buoyed by infrastructure investments while population centres further west play catchup.
In the latest article in our series exploring the social, political and financial trends and themes that will shape the commercial market in the near future, we look at the economic factors currently in play.
Analysts say Australia will still be subject to a “multi-speed economy” in 2018.
Social researcher Mark McCrindle says Australia is experiencing a soft economic period and though that is likely to influence investment decisions, the outlook is still good.
“Things are stable, albeit soft, and I think that is enough security for investment in the commercial and industry sectors,” he says.
“I think what is changing is recognition of Australia as a regional player.”
“Particularly in the industrial sector we have a lot of infrastructure investment, in terms of our roads and rail, which is going to help the logistics side and really reinforce the benefit and opportunity to service our market in Asia.”
VICTORIA ON TOP
AMP economist Shane Oliver says Victoria has the economic edge on every other state in Australia, underpinned by a 2.4% population growth rate compared to the national average of 1.6%.
“The rate of growth in construction of new homes will start to slow down but we are seeing growth in public infrastructure spending,” he says.
New South Wales and Queensland are still sitting comfortably but he says the end of the mining boom means Western Australia and the Northern Territory are now at the bottom of the pack.
OFFICE GROWTH
Melbourne and Sydney’s office markets will continue to flex their muscles, with the growth extending into industrial warehouse and distribution.
“In both those markets we are seeing very low retail vacancy rates,’’ JLL national director head of research Andrew Ballantyne says. “Whereas on the other side of the ledger in WA we have seen only some improvement in terms of activity.”
TRUMPONOMICS
Fears about US President Donald Trump’s decision to tear up the Trans Pacific Partnership are unlikely to have much impact on Australia.
“It would have actually been hard to prove that the agreement was going to have a massive impact on trade anyway,” Oliver says. “It doesn’t take us backwards.’’
Australia’s trade relationship with the US will continue but our links to China will get stronger.
“Australia will sign other trade agreements with China and other regions that the US has let down,” Oliver says. “Most importantly, Trump hasn’t set off a trade war. He has probably been less harmful than what was expected a year ago.”
INFRASTRUCTURE BOOST
If infrastructure helps reinforce markets, there is plenty to look forward to, particularly in Australia’s east coast capitals.
Significant spending in NSW, particularly on major transport projects, including Sydney’s Metro Northwest, will strengthen growth corridors around the Hills Shire to Parramatta and from Chatswood to the CBD.
“That is certainly something that will have a positive impact on commercial property,” Ballantyne says.
BIG SPENDERS
The trend for US pension funds to increase allocations into real assets across the Asia Pacific could pay off as interest in the Australian market grows among risk-averse capital sources.
“Australia ranks as the second most transparent market in the world when it comes to real estate investment, so we can make a fairly good living just by being in the Asia Pacific and being the most transparent market,” Ballantyne says.
RETAIL PRESSURE
While commercial leasing is expected to remain solid, there are doubts over returns in a soft retail environment.
It’s a situation likely compounded by the arrival of Amazon, which will make the retail environment even tougher, analysts say.
Coming up: In the next article in our series, we’ll take an in-depth look at the social trends that are expected to impact the commercial property market in the coming months and years.