Australian markets embrace uncertainty in 2016

Australian markets embrace uncertainty in 2016Investment demand for Australian commercial real estate will remain firm in 2016 despite global uncertainty, according to the latest DEXUS Australian Real Estate Quarterly Review.DEXUS’ review for the first quarter of 2016 finds that Australia’s office, industrial and retail property sectors are well-positioned in the face of uncertainty in global financial markets.Peter Studley, DEXUS general manager of Research, says potential risks such as a slow-down in China and interest rate rises in the United States are being offset by low interest rates and a competitive dollar, which are encouraging employment growth and spending.”Investment demand for Australian commercial real estate is expected to remain firm in 2016 driven by investors seeking yield, continued strong interest from foreign investment and low interest rates,” Studley said.While total transaction volumes for 2015 fell slightly to $26 billion, it remained the second highest on record. Foreign acquisitions comprised 44 per cent of total transactions, with two thirds coming from Asia. The two largest transactions of 2015 – Investa’s $2.4 billion portfolio and the GIC $1.1 billion portfolio – were purchased by Chinese and Singaporean investors respectively. Foreign investors accounted for five per cent of office sales, the biggest percentage on record. “Office markets, particularly in Sydney and Melbourne, are benefitting from positive demand, which will help offset a large amount of new supply in 2016,” Studley said. Meanwhile, the short-term outlook for rents remains subdued.The review predicts that tenant demand in the industrial sector will remain strong; while retail sales will continue to grow steadily, supported by falling petrol prices and the low interest rate environment. “A feature of the outlook over the next two years is the prospect of Australia’s largest states, New South Wales and Victoria, outperforming the rest of the nation,” Studley said, adding that while Queensland’s fortunes will improve, Western Australia will continue to lag behind.Download the DEXUS Australian Real Estate Quarterly Review Q1 2016.