The tremors of political instability, a tough economy, and the rise of e-commerce are the guiding forces behind what looks like a challenging 2019 for the Australian property market.
These conditions, which bubbled under the surface in 2018, are set to make and break investments this year, but could provide some clarity for trends we've been unable to pin down.
With swings and roundabouts abound in 2019 it's certainly a complicated sector, though there will always be wins for those savvy about what's next.
Office investments are expected to face some challenges in 2019, among them bond rates, redemptions, political instability and difficulty in sourcing debt.
The regional director of office leasing at CBRE Paul Badenhorst says the 2019 Federal Election is sure to create some uncertainty in the sector.
Badenhorst believes that Melbourne will remain the most sought-after location for office investments, with Sydney a close second.
Canberra will see significant trading this year, and Brisbane, Perth, and Adelaide will all benefit from the resources recovery and will see some limited yield compression for prime stock, according to Badenhorst.
"Sydney will remain a tight market through 2019," says Badenhorst.
"There has been strong effective rental growth over the preceding period, nearly 14.6% in the Sydney CBD prime market, which is seeing tenants put consideration to stay put options."
"The agile working environment in Sydney is maturing, with it now accounting for an estimated 2% of CBD office accommodation, with over 60 options amounting to more than 100,000sqm, occupiers are starting to understand what this market offers in relation to direct, project and flexible space options in their accommodation strategies."
Though the trends in Adelaide are unclear, Badenhorst says there are still significant opportunities in the South Australian capital.
"Demand from Defence, Resources, Health and associated serviced based industries has created positive sentiment in Adelaide's office leasing markets and, while vacancy remains high, there is a continued downward trend."
"With no surplus space available for lease in new developments being delivered in 2019, it is expected that the older A grade and refurbished B grade market that are able to offer immediate occupancy offerings, will benefit."
Though retail investments have been difficult to predict following the all-encompassing rise of e-commerce Mark Wizel the national director of retail investments at CBRE says clever investors will see the good opportunities when they arise.
"E-commerce threat has been a blessing in disguise forcing an overdue revitalisation of the shopping centre offering taking shape in the form of a successful tenancy remix strategy," says Wizel.
"It was only 10 months ago that some were forecasting the demise of traditional shopping centres on the back of the arrival of some significant e-commerce players into the Australian market. That has not occurred."
"In 2019, we are going to see a firming of those emerging trends that we witnessed over 2017/ 2018."
"We have also seen landlords respond to the e-commerce challenge and its impact on consumer spending within shopping centres particularly across the fashion industry. Remixed tenancies have supported growth in food and beverage as well as service-based retailing, while efforts to keep customers in centres longer have also included more family friendly facilities such as safe/supervised children's play areas. All indications are that these strategies have been successful."
"It wouldn't be surprising to see further efforts to `socialise' shopping centres as meeting places - in much the same manner that strip centres/township centres have done via alfresco dining and the like."
We're always being encouraged to look to our own backyard for a quick getaway, and that trend is certainly looking to stick in 2019.
With a low Australian dollar, the domestic tourism industry is set to thrive, with senior director of CBRE's national hotel brokerage Wayne Bunz predicting that Australians will rediscover the country as they take advantage of more affordable holiday options.
"The Australian hotel landscape is better positioned than ever to soak up this demand, with a tranche of new supply nationwide providing more diverse accommodation options in our top tourism destinations as well as new benchmarks in the luxury end of the market," says Bunz.
Queensland continues to be the jewel in Australia's tourism crown, accounting for 22 of the 56 new hotels that opened nationally in 2018. The state also has Australia's best luxury brands, with now true 5-star offerings previously not seen in Australia.
"The customer appetite for luxury product is here people are willing to pay a premium as long as the service delivers," says Bunz.
"With more and more entrants in this top end of the market, Australia now has the product to meet this demand."
Cairns, and the Hayman and Daydream Islands are fast becoming some of the most sought-after destinations in Australia.
Bunz says hoteliers are also responding to the emergence of Airbnb which has been a thorn in their side for a few years now.
"Locations with substantial oversupply in residential stock pose a threat to the hotel market given the potential for these to be tipped into the overnight letting pool or Airbnb," says Bunz.
"There has been some evidence of this in Melbourne recently and common on the Gold Coast over the years. While we expect occupancy in Melbourne will be sustainable, there may be pressure on rates because of this. This will lead to an increase in buying opportunities in Melbourne over the next two three years."
Business News Australia
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