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Australia Real Estate Report Q3 2012
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The Australian commercial real estate market continues to be fairly balanced because, structurally, the industry functions in a way that restricts over-development. It operates in an economy that, despite weak consumer sentiment and structural changes, is performing reasonably well. The economy and sector are underpinned by resources and demand from China, a reducing threat of interest rate rises, low unemployment and a strong infrastructure sector. We caution, however, that our outlook for the economy in 2012 is bearish, and the country will be negatively affected by the expected slowdown in Chinese economic growth.
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Australia Real Estate Report Q3 2012
Published: June 2012 No. of Pages: 65 Price: US $ 1175
The Australian commercial real estate market continues to be fairly balanced because, structurally, the
industry functions in a way that restricts over-development. It operates in an economy that, despite weak
consumer sentiment and structural changes, is performing reasonably well. The economy and sector are
underpinned by resources and demand from China, a reducing threat of interest rate rises, low
unemployment and a strong infrastructure sector. We caution, however, that our outlook for the economy
in 2012 is bearish, and the country will be negatively affected by the expected slowdown in Chinese
economic growth.
Having consulted our in-country sources in December 2011, we can confirm that whilst rents in some
regions experienced strong growth, it seems our view for a slowdown in Australia's economic growth has
already started to play out. National Australia Bank's commercial property survey for Q311 described the
short-term outlook for retail property as subdued and forecast to remain negative through much of 2012.
Property services firm CB Richard Ellis has said that it detects the long-awaited emergence of Chinese
investors into the direct Australian commercial property markets. Treasurer Wayne Swan has said the
IMF''s annual report on Australia's economy is a strong endorsement of the government. It said the
economy's performance since the onset of the global financial crisis has been enviable.
Some of the key opportunities in the real estate market include:
There is a resources boom in Australia at present, built significantly but not entirely on exports to
China. This is putting money into the economy and bolstering downstream industries.
Following the global financial crisis most Australian REITs have deleveraged to a large degree
and now have capacity, by way of undrawn facilities among other measures, to invest as
opportunities arise.
The Australian commercial real estate market continues to be fairly balanced because,
structurally, the industry operates in a way that restricts over-development. Careful bank lending
policies meant that when demand for space dropped off in 2008 and 2009 there was not suddenly
a glut of vacant property.
The natural disasters in Queensland at the beginning of 2011 are providing a significant lift in the
level of work for the construction industry and businesses that supply the industry. Also, monetary
policy will be kept accommodative in order to drive the post-disaster recovery efforts, although the
effects of this will taper off as work is completed.
The Australian economy is in essentially sound shape. Some key risks to the current real estate
market are:
Weaker-than-expected growth in China would lead to weaker economic performance for
Australia, given that Chinese demand is the largest driver for Australian exports, including coal
and iron ore.
Weakening investor sentiment could result in a subdued market during 2012.
There is a widening gap between the flourishing resources sector and the rest of the economy.
We are concerned about weak consumer sentiment in Australia.
Real Estate Report of Australia Q3 2012
Executive Summary . 5
SWOT Analysis . 7
Australia Real Estate/Construction SWOT 7
Australia Political SWOT .. 7
Australia Economic SWOT 8
Australia Business Environment SWOT . 8
Real Estate Market Overview .. 9
Market Analysis - Office. 11
Rents and Yields ... 11
Supply and Demand . 13
Industry Forecast Scenario ... 14
Market Analysis - Retail . 15
Rents and Yields ... 15
Supply and Demand . 16
Industry Forecast Scenario ... 17
Market Analysis - Industrial .. 18
Rents and Yields ... 18
Supply and Demand . 19
Industry Forecast Scenario ... 20
Forecast Scenarios 21
Infrastructure Report 21
Construction And Infrastructure Forecast Scenario 23
Macroeconomic Forecast . 29
Real Estate/Construction Risk Reward Ratings . 32
Australia Business Environment ... 32
Institutions ... 34
Infrastructure ... 36
Market Orientation .. 39
Operational Risk .. 44
Competitive Landscape . 45
Company Profiles ... 48
Bovis Lend Lease (BLL) ... 48
Brookfield Multiplex (BM) ... 50
Laing O'Rourke ... 52
Leighton Holdings ... 53
Mirvac . 56
Stockland Group .. 58
Demographic Data .. 61
BMI Methodology ... 65
How We Generate Our Industry Forecasts .. 65
Construction Industry .. 66
Bank Lending ... 67
Real Estate/Construction Business Environment Rating .. 67
Sources 71
Published: June 2012 No. of Pages: 65 Price: US $ 1175
The Australian commercial real estate market continues to be fairly balanced because, structurally, the
industry functions in a way that restricts over-development. It operates in an economy that, despite weak
consumer sentiment and structural changes, is performing reasonably well. The economy and sector are
underpinned by resources and demand from China, a reducing threat of interest rate rises, low
unemployment and a strong infrastructure sector. We caution, however, that our outlook for the economy
in 2012 is bearish, and the country will be negatively affected by the expected slowdown in Chinese
economic growth.
Having consulted our in-country sources in December 2011, we can confirm that whilst rents in some
regions experienced strong growth, it seems our view for a slowdown in Australia's economic growth has
already started to play out. National Australia Bank's commercial property survey for Q311 described the
short-term outlook for retail property as subdued and forecast to remain negative through much of 2012.
Property services firm CB Richard Ellis has said that it detects the long-awaited emergence of Chinese
investors into the direct Australian commercial property markets. Treasurer Wayne Swan has said the
IMF''s annual report on Australia's economy is a strong endorsement of the government. It said the
economy's performance since the onset of the global financial crisis has been enviable.
Some of the key opportunities in the real estate market include:
There is a resources boom in Australia at present, built significantly but not entirely on exports to
China. This is putting money into the economy and bolstering downstream industries.
Following the global financial crisis most Australian REITs have deleveraged to a large degree
and now have capacity, by way of undrawn facilities among other measures, to invest as
opportunities arise.
The Australian commercial real estate market continues to be fairly balanced because,
structurally, the industry operates in a way that restricts over-development. Careful bank lending
policies meant that when demand for space dropped off in 2008 and 2009 there was not suddenly
a glut of vacant property.
The natural disasters in Queensland at the beginning of 2011 are providing a significant lift in the
level of work for the construction industry and businesses that supply the industry. Also, monetary
policy will be kept accommodative in order to drive the post-disaster recovery efforts, although the
effects of this will taper off as work is completed.
The Australian economy is in essentially sound shape. Some key risks to the current real estate
market are:
Weaker-than-expected growth in China would lead to weaker economic performance for
Australia, given that Chinese demand is the largest driver for Australian exports, including coal
and iron ore.
Weakening investor sentiment could result in a subdued market during 2012.
There is a widening gap between the flourishing resources sector and the rest of the economy.
We are concerned about weak consumer sentiment in Australia.
Real Estate Report of Australia Q3 2012
Executive Summary . 5
SWOT Analysis . 7
Australia Real Estate/Construction SWOT 7
Australia Political SWOT .. 7
Australia Economic SWOT 8
Australia Business Environment SWOT . 8
Real Estate Market Overview .. 9
Market Analysis - Office. 11
Rents and Yields ... 11
Supply and Demand . 13
Industry Forecast Scenario ... 14
Market Analysis - Retail . 15
Rents and Yields ... 15
Supply and Demand . 16
Industry Forecast Scenario ... 17
Market Analysis - Industrial .. 18
Rents and Yields ... 18
Supply and Demand . 19
Industry Forecast Scenario ... 20
Forecast Scenarios 21
Infrastructure Report 21
Construction And Infrastructure Forecast Scenario 23
Macroeconomic Forecast . 29
Real Estate/Construction Risk Reward Ratings . 32
Australia Business Environment ... 32
Institutions ... 34
Infrastructure ... 36
Market Orientation .. 39
Operational Risk .. 44
Competitive Landscape . 45
Company Profiles ... 48
Bovis Lend Lease (BLL) ... 48
Brookfield Multiplex (BM) ... 50
Laing O'Rourke ... 52
Leighton Holdings ... 53
Mirvac . 56
Stockland Group .. 58
Demographic Data .. 61
BMI Methodology ... 65
How We Generate Our Industry Forecasts .. 65
Construction Industry .. 66
Bank Lending ... 67
Real Estate/Construction Business Environment Rating .. 67
Sources 71
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