Forced listings spike as confidence wanes

The number of forced commercial property listings has spiked in Melbourne.

The number of forced commercial property listings has spiked in Melbourne, driven by lower confidence in the retail sector and a series of residential developers collapsing into administration.

The rise comes despite the rest of the market remaining relatively stable, with office and industrial values rising on the back of higher rents.

Distressed listings have been trending lower over the past five years as the market stabilises in the wake of the mining boom collapse in Western Australia and Queensland.

Economic fundamentals including healthy employment figures and investment in the commercial space have helped keep the market buoyant.

But new data from online classifieds site realestate.com.au shows the number of forced listings in Victoria more than doubled through the September quarter, while South Australian property also increased. Both states were affected by the hard-hit retail sector, while development sites also played a role in Melbourne as Steller Group collapsed and Sydney-based Ralan Group also fell.

Retail and development continue to be two of the most challenged sectors in the commercial space, with both seeing steady growth in distressed listings since the December quarter last year.

Nerida Conisbee, chief economist at the classifieds site, said the rises were inevitable after the heat in the Melbourne market two years ago.

“What’s been interesting this year is that we have seen a bit of an uptick, particularly in Melbourne and Adelaide. But, overall, it has remained pretty stable. Commercial property is pretty solid,” Ms Conisbee said.

“There is starting to emerge some problems in the retail and development space. They are the two most challenged sectors. Retail has obviously been hit by online and low retail trade, which is a big problem.

“Then on the other hand with development sites, there were some very high prices paid for sites. Given how much demand has pulled back, I think some developers are starting to find it quite difficult to get projects up and running particularly to the price paid,” she added.

While they are not distressed sales, a series of Melbourne CBD and fringe office sites have traded to companies looking to reposition them rather than build apartments.

“There was always going to be some fallout from what was happening to development sites in Melbourne and I think that has started to happen and is showing up in these statistics,” Ms Conisbee said.

Distressed listings in the two sectors are down considerably from their 2014 peaks.

While listing numbers in NSW remain higher than those of Victoria, the state has experienced two quarters of falls. ACT and Tasmania have long been the strongest markets.

Despite severe drought affecting much of regional NSW and Queensland, there has been no notable lift in the number of distress listings in the agribusiness sector. Ms Conisbee said buyers had continued to show interest, with water rights and optimism about an end to the drought influencing buyer decisions.