The implications of 'lower for longer'
The Australian Real Estate Quarterly Review Q3 2016 reports on the outlook for Australian office, industrial and retail sectors.
The focus this quarter is on how a ‘lower for longer’ interest rate environment could affect commercial real estate.
Key points covered in this edition include:
- The investment climate is supportive of real estate values as we move into FY17
- The global uncertainty we have seen this year emanating from China, Europe and the Middle East has served to highlight the attractiveness of Australian commercial real estate
- Low interest rates are supporting investment demand for real estate as investors seek a relatively stable yield
- The realisation that interest rates and inflation may stay ‘lower for longer’ means that investors are reducing the level of returns they expect from assets, including real estate
- In addition, occupier demand for office and industrial buildings on the east coast, particularly NSW, is firming due to positive business conditions and solid employment growth
- The result is that real estate is providing solid returns. A-REITs and unlisted property delivered total returns over the past year of 24.6% and 13.4% respectively