Australia Real Estate Market Outlook 2019 Aojg

C B R E R E S E A R C H | A P A C
REAL ESTATE
MARKET
OUTLOOK
AUSTRALIA
TABL E O F CONTENTS
04 06
EXECUTIVE SUMMARY ECONOMIC OUTLOOK
09 13
OFFICE SECTOR RETAIL SECTOR
17 21
LOGISTICS SECTOR HOTEL SECTOR
25 29
RESIDENTIAL SECTOR BUILD-TO-RENT
32 36
CAPITAL MARKETS RISKS & OPPORTUNITIES
CBRE RESEARCH | © 2019 CBRE, Inc. ASI A PACI FI C REAL ESTATE MARKET OUTLOOK 2019 | AUSTRALI A
3
EXECU TIVE SU M M ARY
2019 MARKET OUTLOOK - AUSTRALIA
ECONOMY LOGISTICS
OFFICE
HOTELS
RETAIL
4
EXECU TIVE SU M M ARY
2019 MARKET OUTLOOK - AUSTRALIA
RESIDENTIAL
RISKS & OPPORTUNITIES
BUILD-TO-RENT
CAPITAL MARKETS
5
ECONOMIC OUTLOOK
Still growing, but slowing
ECO NO MIC OU TLOOK
STILL GROWING, BUT SLOWING
There was much to like about the Australian economy in 2018. Economic
growth accelerated, unemployment moved lower (to 5.0%) and construction
activity added to growth, contrasting its 3-year drag post the mining
construction boom. But leading indicators point to weaker conditions this
year; we forecast growth in the global and local economies will slow in 2019.
7
ECO NO MIC OU TLOOK
HAVE WE BORROWED TOO MUCH?
STATE ECONOMIES GROW AND SLOW IN

UNISON
THE WEALTH EFFECT IN REVERSE
8
OFFICE SECTOR
Growth convergence to continue
O F F ICE SECTOR
GROWTH CONVERGENCE TO CONTINUE
Using growth in effective rents as a measure, Sydney and Melbourne were

again the best performing markets in 2018. But separating 2018 from previous
years was that Brisbane, Perth and Adelaide recorded effective rental growth
for the first time in five years. Momentum of growth will continue in these
markets in 2019 whereas growth in Sydney and Melbourne will slow due to
increased supply and softer demand amidst the slowing economy.
SMALLER MARKETS TURN TO GROWTH
10
O F F ICE SECTOR
SUPPLY CYCLE RAMPING UP
CAPITAL MARKETS WILL REMAIN ACTIVE;

PRICE GROWTH TO CONTINUE
11
O F F ICE SECTOR
5G IS ALMOST HERE
EXPANSION OF FLEXIBLE WORKSPACE TO

CONTINUE
BUSINESS SECTOR SLOWDOWN
The deteriorating business climate will see corporates

increasingly focus on cost in 2019. Some 58% of
Australian corporates intend to decrease their
traditional leased office footprint over the next two
years.
12
RETAIL SECTOR
Survive or thrive?
RETAIL SECTOR
SURVIVE OR THRIVE?
The retail environment is changing dramatically, putting pressure on retailers

and transforming the way consumers shop and spend money. Landlords and
tenants continue to adapt in order to remain relevant and capture trade from
consumers whose spending is under pressure from increasing costs of living
and deteriorating balance sheets. In a changing retail environment, will
retailers merely survive or will they thrive?
14
RETAIL SECTOR
CYCLICAL V STRUCTURAL CHANGE
SLOWING RESIDENTIAL SECTOR TO IMPACT

LARGE FORMAT SALES
15
RETAIL SECTOR
NEIGHBOURHOOD SHOPPING CENTRE

SUPPLY PICKING UP
VALUE AND RENT GROWTH LIMITED
Retailers are investing in omnichannel strategies to

drive sales with an estimated 34% of retail sales to be
web-influenced by 2020.
16
LOGISTICS SECTOR
Structural change driving growth
L O GISTICS SECTOR
STRUCTURAL CHANGE DRIVING GROWTH
Australia’s industrial and logistics economy continues to perform strongly, with

a number of major infrastructure projects driving growth in the construction
sector. The rise of e-commerce is creating structural change, resulting in
continued demand and growth in the industrial and logistics sector.
INDUSTRIAL ECONOMY SOLID IN 2018
18
L O GISTICS SECTOR
INDUSTRIAL GDP
0.3% RENTS GROW AMID SOLID DEMAND AND

y-o-y change at Q3 2018 LIMITED SUPPLY
SUPER PRIME CAPITAL VALUES
6.9%
y-o-y change at Q4 2018
SUPER PRIME RENTAL

YIELDS AT RECORD LOWS WITH LIMITED
2.3%
FURTHER COMPRESSION EXPECTED
y-o-y change at Q4 2018
SUPER PRIME YIELD
6.0%
Australia average at Q4 2018
19
L O GISTICS SECTOR
DWINDLING SERVICED LAND SUPPLY LEVELS

DRIVING SOLID VALUE GROWTH
E-COMMERCE TO DRIVE NEW SPACE TAKEUP
CBRE has determined that e-commerce will create

demand of an additional 350,000sqm of new
industrial and logistics space in Australia each year
until 2022.
20
HOTELS
Weaker currency will lend support
HO TELS SECTOR
WEAKER CURRENCY WILL LEND SUPPORT
Hotels in 2019 will benefit from a weaker Australian currency, which will help
entice international visitors and encourage locals to stay at home. But locals
might stay at home a little more than hoteliers will want: household finances
are under pressure and will dampen some Australians’ willingness to travel. A
headwind inherent in our forecast of lower economic growth this year is that
corporate travel plans may be subdued.
RevPAR GROWTH WAS POSITIVE IN 2018
22
HO TELS SECTOR
SOME MARKETS WILL BE AT GREATER RISK

OF LOWER REVPAR GROWTH
COST PRESSURES LIMIT DOMESTIC TRAVEL
23
HO TELS SECTOR
INVESTOR SENTIMENT ENCOURAGING
24
RESIDENTIAL
Correction, but how much?
RESIDENTIAL SECTOR
CORRECTION, BUT HOW MUCH?
While Australia’s largest residential markets, Sydney and Melbourne, are now
firmly in a correction phase, the full extent of price adjustment remains
uncertain, with several regulatory and political factors muddying the waters
as we start 2019. The smaller capital cities didn’t see the same level of price
elevation and should deliver better performance in the short term.
HOW LOW WILL PRICES GO?
26
RESIDENTIAL SECTOR
A YEAR OF KNOWN UNKNOWNS
27
RESIDENTIAL SECTOR
CONSTRUCTION ACTIVITY SLOWING
28
BUILD-TO-RENT
Market gaining traction
BU IL D- TO- RENT
MARKET GAINING TRACTION
The nascent build-to-rent (BTR) sector will continue to progress in 2019 with
developments breaking ground and an increasing number of investors
actively seeking sites to develop in this emerging asset class. But the sector still
has its challenges. Some existing tax policies aren’t overly favourable for BTR
but may come under review if a change of federal government occurs in the
first half of the year. Land prices remain elevated but our view is that in 2019
these will follow dwelling prices lower, improving the economics of BTR.
30
BU IL D- TO- RENT
WILL PEOPLE WANT TO LIVE IN BUILD-TO-

RENT ACCOMMODATION?
TAXATION REMAINS AN ISSUE
With over 3,000 units under construction and a

handful of projects opening up this year, the question
as to whether the general public embraces the
concept will be closer to an answer.
31
CAPITAL MARKETS
Reaching the top
CAPITAL M ARKETS
REACHING THE TOP
After a thriving transaction environment over the past five years, 2019 is
expected to see a reduction in the total number of sales, marking a
continuation of the trend in declining transactions since 2016. Restrictive
capital controls in China, tighter lending criteria and yields at historical lows in
many markets will all contribute to a quieter year in terms of buyer activity.
33
CAPITAL M ARKETS
RISK PREMIUMS TRENDING UPWARDS
MARKETS AND SECTORS DIFFER
34
CAPITAL M ARKETS
DEBT MARKETS TIGHTENING
35
RISKS & OPPORTUNITIES
RISKS AND OPPORTUNITIES
GLOBAL ECONOMIC SLOWDOWN DEEPER

AND LONGER THAN EXPECTED
BUYING OPPORTUNTIES IN THE AGED CARE

SECTOR
•
WEAKER AUSTRALIAN DOLLAR MAKES

AUSTRALIA BETTER VALUE FOR MONEY FOR
OVERSEAS INVESTORS
FALLING RESIDENTIAL LAND VALUES MAKE
BUILD-TO-RENT MORE VIABLE
NEW OFFCE SUPPLY GENERATES INVESTOR

AND OCCUPIER OPPORTUNITIES
37
RISKS AND OPPORTUNITIES
OVERSUPPLY AND THE SHARING ECONOMY

A RISK IN SOME HOTEL MARKETS
WHAT IF RETAILER EXITS CONTINUE TO

RISE?
OPPORTUNITIES FOR ALTERNATIVE

LENDING SOURCES
38
RESEARCH
CBRE RESEARCH
This report was prepared by the CBRE Australia Research Team, which forms part of CBRE Research – a network of preeminent researchers who collaborate to provide
real estate market research and econometric forecasting to real estate investors and occupiers around the globe.
All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including
projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it
and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency
of the information of this publication. This report is presented for information purposes only exclusively for CBRE clients and professionals, and is not to be used or
considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and
none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written
permission of CBRE. Any unauthorized publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for any loss, damage, cost or expense
incurred or arising by reason of any person using or relying on information in this publication.
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports
© 2019 CBRE, Inc.

Australia Real Estate Market Outlook 2019 Aojg

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Australia Real Estate Market Outlook 2019 Aojg

Uploaded by

Copyright:

Available Formats

C B R E R E S E A R C H | A P A C

2019 MARKET OUTLOOK - AUSTRALIA

2019 MARKET OUTLOOK - AUSTRALIA

RISKS & OPPORTUNITIES

STILL GROWING, BUT SLOWING

HAVE WE BORROWED TOO MUCH?

STATE ECONOMIES GROW AND SLOW IN

THE WEALTH EFFECT IN REVERSE

GROWTH CONVERGENCE TO CONTINUE

Using growth in effective rents as a measure, Sydney and Melbourne were

SUPPLY CYCLE RAMPING UP

CAPITAL MARKETS WILL REMAIN ACTIVE;

EXPANSION OF FLEXIBLE WORKSPACE TO

BUSINESS SECTOR SLOWDOWN

The deteriorating business climate will see corporates

The retail environment is changing dramatically, putting pressure on retailers

CYCLICAL V STRUCTURAL CHANGE

SLOWING RESIDENTIAL SECTOR TO IMPACT

NEIGHBOURHOOD SHOPPING CENTRE

VALUE AND RENT GROWTH LIMITED

Retailers are investing in omnichannel strategies to

STRUCTURAL CHANGE DRIVING GROWTH

Australia’s industrial and logistics economy continues to perform strongly, with

0.3% RENTS GROW AMID SOLID DEMAND AND

SUPER PRIME CAPITAL VALUES

SUPER PRIME RENTAL

y-o-y change at Q4 2018

SUPER PRIME YIELD

DWINDLING SERVICED LAND SUPPLY LEVELS

E-COMMERCE TO DRIVE NEW SPACE TAKEUP

CBRE has determined that e-commerce will create

WEAKER CURRENCY WILL LEND SUPPORT

SOME MARKETS WILL BE AT GREATER RISK

COST PRESSURES LIMIT DOMESTIC TRAVEL

INVESTOR SENTIMENT ENCOURAGING

CORRECTION, BUT HOW MUCH?

HOW LOW WILL PRICES GO?

A YEAR OF KNOWN UNKNOWNS

CONSTRUCTION ACTIVITY SLOWING

MARKET GAINING TRACTION

WILL PEOPLE WANT TO LIVE IN BUILD-TO-

TAXATION REMAINS AN ISSUE

With over 3,000 units under construction and a

REACHING THE TOP

RISK PREMIUMS TRENDING UPWARDS

MARKETS AND SECTORS DIFFER

DEBT MARKETS TIGHTENING

GLOBAL ECONOMIC SLOWDOWN DEEPER

BUYING OPPORTUNTIES IN THE AGED CARE

WEAKER AUSTRALIAN DOLLAR MAKES

NEW OFFCE SUPPLY GENERATES INVESTOR

OVERSUPPLY AND THE SHARING ECONOMY

WHAT IF RETAILER EXITS CONTINUE TO

OPPORTUNITIES FOR ALTERNATIVE

© 2019 CBRE, Inc.

You might also like