Fortunes within the commercial property sector in Australia will differ substantially according to geographical location and individual sector as demand rises in New South Wales but falls in Western Australia and conditions improve in retail and industrial markets but soften in office markets, a new report says.

In its Market Outlook Australia for 2015, international real estate services firm CBRE says it expects modest rental growth of 2.1 per cent and 1.7 per cent for the retail and industrial segments respectively but forecasts stagnant rents (0.3 per cent) in the office sector.

CBRE says while the overall economy will be helped somewhat by continued strong conditions in the export and housing sectors, it says the negative impact of the downturn in resource construction will continue and overall levels of employment growth will remain modest at best.

Across states and sectors, it says New South Wales will benefit from a strong economy, while demand in Western Australia will continue to drop back as the mining boom recedes. A combination of active foreign retailer entry, strong sales of household goods and respectable levels of transport and logistics demand should underpin modest growth in retail and industrial sector rents but a growing supply pipeline will continue to constrain any growth in office rents notwithstanding modest improvements in demand.

CBRE head of research Stephen McNabb says 2015 would be a year for “balancing the risks as growth divergences continue” from an investor perspective.

“Looking at markets in a broader geographical context, the differing economic outlook between states will influence underlying tenant demand and ultimately the attraction for investors,” he said. “…looking at the individual property sectors, the report forecasts more favourable revenue conditions for retail and industrial occupiers, which, combined with contained supply in most markets, will provide some support for rental growth.

“However, office occupier revenue growth will be low relative to past cyclical upswings, which will keep a lid on office rental growth.”

The report comes amid reasonable levels of optimism regarding short-term prospects for the property sector in Australia.

Participants in the latest Property Council of Australia Property Industry Confidence Survey, for example, expect stronger levels of work volumes, staffing and construction activity as well as healthy levels of capital growth in residential, retail, accommodation and retirement living property.

In its 2015 Asia Pacific Outlook, meanwhile, Colliers International chief executive officer of Australia & New Zealand John Kenny says he expects “more of the same” in 2015 after referring to 2014 as “the year that investment in property continued to accelerate.”

In terms of individual sectors, CBRE says the outlook is as follows:


  • Growth in supply expected to outpace that of demand over next three years
  • Flat rents for 2015
  • Movement toward city fringes as technology companies become increasingly prevalent in market


  • Modest upward pressure on rents as foreign retailers roll out expansion in Prime CBD locations
  • Negligible perceived supply risk
  • Lacklustre turnover in department stores
  • Strong returns on large format retail assets


  • Demand outweighing supply in ‘super prime’ assets – newly constructed buildings in core locations with long lease terms
  • Strong activity in transport and logistics centres to drive modest growth in rents
  • Lower Australian dollar to partially relieve pressure on exporters and manufacturers exposed to import competition