The Australian economy is facing overseas and domestic headwinds that will slow economic growth in 2019 and adversely impact property markets. But typically there are two sides to every story, and although change can represent a threat to some, others may deem it an advantage.



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This report was prepared by the CBRE Asia Pacific Research Team, which forms part of CBRE Research – a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate investors and occupiers around the globe.

© 2019 CBRE, Inc. Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

 

Economy

Still Growing, But Slowing


The economy performed well in 2018 but headwinds that emerged in the latter part of the year suggest economic growth in 2019 will be lower. The slowdown in residential construction will impact the office and retail sectors downstream, and falling dwelling prices will weigh on consumer confidence.

 

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Office Sector

Continued Growth Ahead


2019 will see the supply pipeline turned back on after being virtually dormant for two years. The number of flexible office centres will continue its strong growth trajectory. Australian corporates surveyed expect to decrease their traditional leased office footprint over the next two years, whilst increasing their use of coworking space.

 

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Retail Sector

Survive or Thrive


Retailers will increasingly employ omnichannel strategies in order to capture a slice of the ongoing growth in online retail. The number of major retailer defaults has been on the rise in Australia and we expect this will continue, given the economic headwinds that will impact consumers in 2019.

 

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Logistics Sector

Structural Change Driving Growth


Well located industrial areas with land availability constraints will see proposals for multistorey warehouses in 2019. Land prices have grown strongly for inner city locations over recent years, yet industrial demand will continue to grow as last-mile logistics becomes increasingly important for supply chain efficiencies.

 

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Hotels

Weaker Currency Will Lend Support


With the expectation of a lower Australian dollar in 2019, this will benefit hotel operators by attracting international visitors and dissuading Aussies from travelling abroad. The projected weaker AUD reflects a weaker economy, and that being the case we expect the level of corporate travel will decline in 2019.

 

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Residential Sector

Correction, But How Much?


APRA’s imposed limitations on investor lending are now having significant effects on the residential sector. There are also a number of known unknows that could profoundly impact the residential sector in 2019 such as the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the looming federal election, and any changes in Australia’s overseas migration intake and related policy.

 

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Build to Rent

Market Gaining Traction


The pace of progression in this emerging sector is expected to pick up in 2019 as changing conditions in the residential market, particularly falling land values, improve potential returns for prospective build-to-rent developments. With over 3,000 units under construction and a handful of projects opening up this year, the question as to whether the general public embraces the concept will be closer to an answer.

 

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Capital Markets

Reaching the Top


Transaction volumes this year will likely continue the downward trend since 2016, more attributable to the decline in owners willing to sell rather than a dearth of buyers. There remains strong buyer interest from local and offshore capital, and selected Australian office and industrial markets still offer some of the best prospects for rent growth within the APAC region. Global investors requiring an increase in APAC allocation in 2019 will still have Australia on their target list.

 

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