Offices, hotels and goods stores to lead commercial property upswing: BIS Shrapnel

The next upswing in the commercial and industrial property market is expected to commence this financial year led by a new wave of office and hotel construction, according to BIS Shrapnel.

While retail construction is expected to  remain weak, investment in bulky good stores spurred on by the competition between DIY store expansions (Wesfarmers’ Bunnings and Woolworths’ Masters) will continue, while suburban malls with a strong supermarket presence will also be the focus of new investment.

BIS Shrapnel forecasts – non-residential commencements by sector

Across commercial property, the research firm is forecasting a 6% rise in building commencements in the next financial year after no growth 2011-12 as part of a “prolonged upswing” for the sector.

However, in its Spring 2012 Forecasts, BIS Shrapnel warns that businesses will remain wary about committing to new developments “even as undersupplies in some markets become increasingly evident”.

BIS Shrapnel is forecasting office starts to lift by 13% to $5.17 billion in 2012-13 as the national office market tightens over the next few years. This follows an estimated 4% rise in office commencements to $4.39 billion in 2011-12.

“While the current economic climate is volatile gradual growth is expected which will flow through positively to employment.

“At the same time, the rate of completions will persist at a low level, limiting additional supply. As this occurs effective rents and prices will rise and supply will react in most markets,” says BIS Shrapnel.

New building construction in the accommodation sector is estimated to have risen by 21% over 2011-12 to just under $1 billion, and BIS Shrapnel is tipping a 43% surge to $1.35 billion in 2012-13.

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