Are retail property concerns weighing on sentiment?

Retail Property_ by Global Capital Commercial

According to a quarterly survey that has been conducted by the National Bank of Australia, sentiment in the retail property market is suffering. Overall, the commercial property market has been observed to be waning even though the hotel sector is booming. Here we explore whether retail property concerns are weighing on sentiment.

How is the sentiment ranked?

The recent shift in sentiment for commercial property shows a dire change in the confidence that can be seen in retail property. While the CBD hotels sector is dramatically up by 30 points with 75 points in the quarterly commercial property index, this contrasts with a sharp drop in sentiment in the retail property sector. The drop in retail property sentiment has resulted in a negative figure for the first time since 2014.

What are the retail property concerns?

Consumer spending is currently low and this is forecast to continue. Australia seems to be heading towards a period of market slow down for a number of reasons. Wage growth is presently limited in Australia and house prices look set to ease, which in reality will lower the average wealth of Australians. With lower levels of disposable income available, the retail property market will be one of the first to be hit. The National Bank of Australia’s chief economist, Alan Oster, says that “any improvement in consumer spending will be slow” and it appears that this concern is weighing on the sentiment for investment into retail property.

Is it doom and gloom for the entire retail industry?

In contrast to the retail property sentiment, the industrial property sentiment has seen a boost that is integrally tied to the success of eCommerce. With the growth of Amazon and other eCommerce businesses in Australia, the investment in industrial properties such as warehouses and logistics activity has increased dramatically. Sentiment has increased for this new form of online retail and this is also serving to harm the sentiment for retail property, limiting investment opportunities.

Is sentiment down Australia-wide?

All states in Australia are showing to have less overall confidence in commercial investments and sentiment is down for retail property right across the board. New South Wales remains the most optimistic investment state with Western Australia, Northern Territory and Southern Australia showing the lowest sentiment in the industry.

Will sentiment for retail property improve?

With the current wage and housing value outlook it is unlikely that the sentiment for retail property investment is going to change in the near future. According to the National Bank of Australia, property experts do not expect that we will see any improvement in investment terms in the near future and this could continue to keep putting investors off.

Are retail property concerns weighing on sentiment?

From the results of the National Bank of Australia quarterly report it seems clear that sentiment is currently suffering from concerns about the future of the retail industry. With the country on track to experience a reduction in average disposable income and an increased preference for eCommerce, the sentiment for the retail property development market is taking a hit.