Last Friday, I attended the annual Commercial & Industrial Economic Forecast Luncheon.
And Dr Frank Gelber (director of BIS Shrapnel) kindly provided is perspective on the Australian economy and the Melbourne Commercial property market — looking forward for the next 5 to 6 years.
Probably the most pleasing aspect was … that his views will were pretty much in line with what I’ve been telling you here, for the past six months or so …
- The underlying fundamentals for the Australian economy are strong.
- The full effect of the renewed mining boom will start to be felt across the country early in 2012 … bringing a return of confidence.
- The current consumer hesitancy is due to a high level of “Precautionary Savings”, which will soon begin to slow.
- Commercial property has commenced its up swing, due to peak between 2016 to 2018 — differing for each capital city.
- Victoria has led the way, with strong investment and population growth.
- Melbourne Offices began their upswing in 2010; and will enjoy strong rental and capital growth over the next 4 to 5 years.
Talking afterwards with Frank, he indicated the peak for each CBD Office market will be somewhat staggered this time around. And his predictions as to timing are covered in the table.
Given that all other capital cities entered their upswings after Melbourne (and will therefore peak slightly later) … this may well ‘stretch’ Melbourne’s peak, through to 2016-17.
Bottom Line: As you’ll appreciate, companies accumulate their Precautionary Savings gradually. And as individuals, you also tend to save monthly from your pay packet.
However, as soon as the general confidence levels return early in 2012 … these Savings will be spent quickly, and as lump sums.
This is what will help drive the current upswing for Commercial property. So, just make sure you’re positioned … ready to ‘ride the wave’.
And remember: you also need to keep an eye on the predicted peaks — so that you don’t allow yourself to be blinded by the hype, and hang on past the top of the cycle.
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