Hiring expectations tumble to two-year low
The employment outlook in the property market generally and office assets in particular is getting grimmer as the sector feels the impact of rising borrowing costs and a weaker economic outlook.
The Property Council of Australia’s latest report on sentiment shows that hiring expectations have fallen to a two-year low, as has the outlook for capital growth in office assets, according to The Australian Financial Review.
The property industry accounts for 13% of national GDP and employs 1.4 million people, AFR reported. According to the Property Council, conditions in the sector are still positive, with many firms still expecting a pipeline of work – particularly in the residential sector, which is still working through a backlog of orders. But confidence is falling.
“We have seen some movement, and that trend is downwards,” Property Council chief executive Ken Morrison told AFR.
ANZ senior economist Felicity Emmett said the survey showed firms still felt positive about their forward work schedules, but the impact of rising interest rates, worries over access to finance, and rising costs were dragging down sentiment.
“Staffing expectations are turning down now quite consistently, suggesting this sentiment is starting to impact firm decisions,” Emmett told AFR. “It is still at elevated levels, but the downward trend suggests a lot of strength we’ve seen in the labour market is going to unwind in the next couple of years.”
Office sector slips
The Property Council index for staffing levels over the next 12 months fell to 17.3 after holding in the low 20s the two previous quarters. That’s the lowest level since December 2020’s reading of 12.3.
Expectations for office capital also slipped. That index – which has already spent a year in negative territory – dropped to -24, the lowest sentiment reading since -41 in December 2020. While expectations for industrial growth stayed positive, they hit their weakest level so far this year.
Commercial agency CBRE said property transactions plummeted 29% this year to $35.9 billion, spurred by a severe plunge in activity in the second half of the calendar year.
The largest decline was in industrial and logistics transactions, which tumbled 61% to $7.3 billion this year, AFR reported.
The office sector also suffered as total transaction volumes dropped 16% from 2021 to $15.2 billion, with many vendors yanking assets from the market to see how pricing would perform next year.
“In a higher interest rate environment, the market has returned to a price discovery phase, which has caused deal activity to drop,” CBRE head of capital market research Tom Broderick told AFR.
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