This quarterly report has been developed in response to the growing demand for regular analysis and insight into how economic activity impacts real estate.

Real estate, along with almost every industry in Australia, faces a challenging economic climate due to significant geopolitical conditions, including:

  • increasing inflation and interest rates
  • heightened risks
  • supply chain challenges
  • the collapse of construction companies.


This series of reports provides insights from our Real Estate and Economics experts, in conjunction with Real Investment Analytics (RIA), on the current economic environment and each of the real asset classes. It also addresses the eternal question of whether real estate is an inflation hedge.



Key findings

Key real estate sector findings and themes for FY22 Q4 include:

Office sector icon

Office sector

Corporate tenants and investors continue to place greater focus on high-quality environmentally friendly buildings.

retail

Retail sector

A greater distinction between discretionary and non-discretionary shopping centres is emerging in evaluating risk and pricing.

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Industrial sector

Continued advancements in e-commerce will see new industrial supply to accommodate growing demand.



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Challenging conditions for space markets and capital markets

We expect this to continue over the short term, as central banks take aggressive action to manage inflation and increase interest rates. We expect the property sectors will likely see weaker demand for space, higher vacancies and downward pressure on effective rents.

money bag

A limit to the capacity of commercial real estate to act as an inflation hedge

Most leases are fixed, and escalation factors are below the current and expected CPI inflation over the next 18 months. Asset values are likely to retreat somewhat as rising interest rates drive softer cap rates.



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