Commercial property confidence throughout Australia has been badly impacted by the COVID pandemic, the latest report suggests.
Releasing its latest survey of around 370 property professionals, the National Australia Bank said its Commercial Property Index fell from neutral (0) in the first quarter to an unprecedented level of -62 in the second quarter.
Sentiment plummeted across all states/territories and was negative across all sectors – particularly office, retail and CBD Hotels.
Expectations have soured in terms of both capital values and rents.
Over the next twelve months, those surveyed expect capital values in offices, retail outlets, CBD Hotels and industrial property to fall by 4.4 percent, 4.7 percent, 4.4 percent and 0.9 percent respectively.
Rents, meanwhile, are expected to fall by 4.5 percent, 5.6 percent and 1.4 percent in office, retail and industrial property.
Meanwhile, participants saw the market for all types of property as being oversupplied both currently and over the next twelve months and three years.
This was particularly the case with hotels – a sector which has been impacted by travel restrictions at a time when large volumes of new stock has hit the market following a boom in hotel construction.
Also impacted have been development intentions.
Whilst short term commencement intentions have held up well, the percentage of developers expecting to commence new projects over a six to twelve-month timeframe has fallen from 27 percent in Q1 2019 to 13 percent in 2020.
As well, the survey examined how respondents felt that office markets would change in response to the pandemic.
Overwhelmingly, participants say markets will be impacted by extensions of working from home after the pandemic (80 percent), structural changes in how space is used such as lower workplace densities (76 percent), a slowdown in leasing volumes and renewals (68 percent) and reductions in cash flow/security of income due to an inability of tenants to continue to operate or to pay rent (60 percent).
Participants anticipated less impact from a greater dispersion of office buildings across metro areas rather than high concentrations in the CBD (40 percent), tenants demanding greater amenity such as better lounge areas or green spaces (31 percent) and a move away from open plan offices and a return to the corner office (22 percent).
In retail, meanwhile, the pandemic has impacted rent collections.
In the case of strip shopping centres, 70 percent of respondents have either not collected rent or say collections have fallen by 30 percent or more.
For regional shopping centres, collections are down 30 percent or more for 56 percent of landlords.
According to the Shopping Centre Council of Australia, more than 150 deals for rent relief are being reached between landlords and tenants each day.