Commercial property market confidence at new lows amid COVID-19 fight

24 July 2020

Commercial property confidence has unfortunately sunk to a new low according to the National Australia Bank Commercial Property Index.

All sectors have taken a confidence hit, with retail, office and hotel real estate all suffering record-low declines.

“These sectors struggled because of widespread changes in working arrangements, mandatory closures in hospitality and social distancing, and travel restrictions that saw occupancy rates in CBD hotels to fall to just 37 per cent in Q2,” the NAB Commercial Property Survey Report says.

The survey involved 370 respondents that were real estate agents, property developers, fund managers and investors and asked them what they thought of the prospects of the sector.

Sentiment dropped to negative 62 on the index which is significantly lower than the previous low of negative 19 points recorded in 2012.

“The results suggest property experts are not expecting markets to improve any time soon,” the report says.

Respondents are expecting the shift towards working from home to continue and for further structural changes to occur to how office space is used.

“A large number also expect to see slower leasing volumes and renewals, and cash flow reductions due to firms’ ability to continue operating and pay rent and how this will impact investors’ mindset as key changes,” the report says.

“Only 2 per cent believe that conditions will return to pre-COVID-19 patterns.”

“The number of developers looking to start new works in the next 18 months fell heavily to a survey low 68 per cent in Q2, suggesting the disruption caused by the pandemic has not only had an immediate impact on the building construction industry but will continue to impact over the next few years.”


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