Economy takes toll on confidence in commercial property sector

Weak economic conditions have damaged confidence in the commercial property sector, according to data from NAB.

Weak economic conditions have damaged confidence in the commercial property sector, according to data from National Australia Bank.

A drop of four percentage points among surveyed executives comes despite perceptions of the retail sector strengthening, which kept overall confidence in line with long-term averages.

The office and industrial sectors continue to be the strongest performers, with respondents expecting growth to continue over the next 12 to 24 months.

While retail sentiment ­remains poor, it is expected to trend higher, possibly moving into positive territory in the next two years.

NAB chief economist Alan Oster said the biggest drag on ­retail would be discretionary household spending.

“Sentiment in the retail sector … remains lowest overall as slow wage growth, high debt levels and stretched budgets continue to weigh on the household sector,” he said.

Market confidence was ­primarily hindered by concerns in the CBD hotels sector, which fell to a new low over the quarter.

Victoria and NSW experienced the biggest falls in confidence, with the latter posting its first negative read in sentiment since mid-2014. Confidence in the office sector and an increase in leasing activity meant Queensland recorded the largest positive move.

The survey also showed the number of property developers expecting to start new works in the short term remains well below average as they face weakness in both housing and non-residential construction.