NAB COMMERCIAL PROPERTY SURVEY Q2-2020

Date July 2020 | NAB Behavioural & Industry Economics

EMBARGOED UNTIL 11.30 AM, 22 JULY 2020

2

KEY FINDINGS• The COVID-19 led economic slow down had a major impact on commercial

market sentiment in Q2, with NAB’s Commercial Property Index falling to an unprecedented -62 points (surpassing the previous low of -19 in Q3 2012).

• Sentiment collapsed in Retail (-76), Office (-68) and CBD Hotels (-60), but the fallout for Industrial property (-28) was comparatively limited.

• Sentiment fell steeply in all states, with VIC (-60), NSW (-63) and QLD (-49), joining SA/NT (-67) and WA (-63) in deeply negative territory.

• The hit to confidence was also severe, with the 12-month index falling to -55 and the 2-year measure to -29 - its first ever negative read. The results suggest property experts are not expecting markets to improve any time soon.

• With COVID-19 driving new norms around how we work, shop and live, confidence levels are now weakest for Retail and Office property. Confidence has also been shaken (and is now negative) in all states.

• Expectations for capital growth for the next 1-2 years were pared back significantly for Office (-4.4% & -3.0%) and Retail (-4.7% & -2.8%), with falls predicted in all states. Industrial values are set to fall moderately in the next 12 months, but the outlook in 2 years’ time is positive.

• Office vacancy hit a 2-year high 8.5% in Q2, and climbed steeply in VIC (7.4%) and NSW (6.7%). Retail vacancy also hit new survey highs (9.0%), but industrial property remained insulated, with vacancy falling (5.8%).

• As many commercial tenants struggle in the wake of the COVID-19 led downturn, the outlook for rents was pared back sharply for both Retail (-5.6% & -3.6%) and Office (-4.5% & -2.9%) property over the next 1-2 years.

• Supply over-hangs have now also emerged in all sectors, bar Industrial. • The number of developers looking to start new works in the next 18 months

fell heavily to a survey low 68% in Q2, suggesting the disruption caused by the pandemic has not only had an immediate impact on the building construction industry, but will continue to impact over the next few years.

• Property experts indicated that debt funding conditions were more difficult in Q2, and expect it will remain so in the next 3-6 months. With market uncertainty persisting, the average pre-commitment required to meet funding requirements for new developments across Australia rose significantly for both residential and commercial property in Q2.

• New research finds that 8 in 10 property experts expect the biggest changes in Office markets from COVID-19 will be the continuation or extension of working from home, and structural changes as to how office space is used.

• A large number also expect to see slower leasing volumes and renewals, and cashflow reductions due to firms’ ability to continue operating and pay rent and how this will impact investors’ mindset as key changes. Only 2% believe that conditions will return to pre-Covid-19 patterns.

Q1’20 Q2’20 Next 12m Next 2y

Office 26 -68 -66 -41

Retail -28 -76 -73 -49

Industrial 7 -28 -14 9

CBD Hotels -38 -60 -40 0

CP Index 0 -62 -55 -29

• New research also shows COVID-19 had a big impact on rent collections across all Retail property formats. Bulky Goods Retail and Large Format Retail look to have held up best, with 30% and 21% of property experts reporting no change in collections from these formats. This compares to 7-8% from Neighbourhood and Regional Shopping Centres and in Strip Retail.

• At the other extreme, rent collections were 30-50% lower from significantly more Strip Retailers (43%), and were down 50% or more from 45% of Other Retailers, 24% of Strip Retailers and 20% of Regional Shopping Centres.

-100

-80

-60

-40

-20

0

20

40

60

80

100

Q1'

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2'20

NAB COMMERCIAL PROPERTY INDEX

CP Index Office Retail Industrial CBD Hotels

Index

3

The COVID-19 led economic slowdown had a major negative impact on commercial property market sentiment in Q2. NAB’s Commercial Property Index (a sentiment measure based on expectations for capital values and rents) fell to an unprecedented -62 points (easily surpassing the previous survey low of -19 points in Q3 2012).Sentiment collapsed in most market sectors - led by Retail (-76), Office (-68) and CBD Hotels (-60). These sectors struggled because of widespread changes in working arrangements (from the office to homes), mandatory closures in hospitality and social distancing (causing many Retailers to fail), and travel restrictions that saw occupancy rates in CBD Hotels to fall to just 37% in Q2 according to surveyed property experts.The fallout for Industrial property (-28) was comparatively limited, largely due to warehousing requirements arising from the rapid acceleration in online shopping over recent months.

MARKET OVERVIEW - NAB COMMERCIAL PROPERTY INDEXThe hit to overall market confidence was also severe. The 12 month measure fell 64 points to a survey low -55, with the 2 year outlook (down 47 points to -29) posting its first negative read. This suggests property experts do not expect markets to improve any time soon.With COVID-19 driving new norms around how we work and shop, confidence was weakest for Retail and Office property, with Q2 seeing heavy downward revisions to the outlook for capital and rental growth in both sectors (see below).In the CBD Hotels sector, confidence in the next 12 months was a little better (-40) after a very steep fell in Q1, but remains very weak. The longer-term outlook has however improved noticeably (flat) with occupancy rates to reach 65% as travel restrictions are eased.Longer-term confidence in Industrial markets is positive (+9), with the sector looking set to benefit from growing demand for warehousing and logistics as online demand continues to grow.

39

-38

20

-15

726

-28

7

-38

0

-68-76

-28

-60 -62

-100

-80

-60

-40

-20

0

20

40

60

Office Retail Industrial CBD Hotels CP Index

NAB COMMERCIAL PROPERTY INDEX

Q2'19 Q1'20 Q2'20

-66-73

-14

-40

-55

-41-49

90

-29

38

-24

28

-50

9

49

-12

37

-63

17

-100

-80

-60

-40

-20

0

20

40

60

80

Off

ice

Reta

il

Indu

stri

al

CBD

Hot

els

CP In

dex

Off

ice

Reta

il

Indu

stri

al

CBD

Hot

els

CP In

dex

NAB CP INDEX - NEXT 1-2 YEARS

Q2'20 Q2'20 previous qtr previous qtr

Next 12 months Next 2 years

4

Market sentiment fell steeply in all states in Q2, with VIC, NSW and QLD, joining SA/NT and WA in deeply negative territory. Market sentiment ranged from a woeful -67 in SA/NT to -49 in QLD.Confidence has also been shaken in all states, with the 12 month measure ranging from -58 in NSW to -41 in QLD. Longer-term confidence measures are now also negative in all states, but somewhat less dire than for the next 12 months. SA/NT (-55) is the outlier, with property experts in NSW (-19) and QLD (-21) the least pessimistic, albeit still very negative.The table on the right shows a sea of red, with sentiment and confidence lower in all states and in all property segments compared to Q1 (bar SA/NT Retail). Moreover, readings are very weak across the board, except for Industrial property which is positive in all states in 2 years’ time (bar SA/NT), led by QLD (+29) and NSW (+22).

MARKET OVERVIEW - INDEX BY STATEOFFICE PROPERTY MAKET INDEX: STATES

VIC NSW QLD WA SA/NT AUS

Q2’20 -68↓ -63↓ -68↓ -71↓ -88↓ -68↓

Q2’21 -71↓ -65↓ -75↓ -43↓ -50↓ -66↓

Q2’22 -53↓ -24↓ -48↓ -43↓ -50↓ -41↓

RETAIL PROPERTY MARKET INDEX: STATES

VIC NSW QLD WA SA/NT AUS

Q2’20 -64↓ -83↓ -79↓ -79↓ -70↑ -76↓

Q2’21 -64↓ -73↓ -76↓ -79↓ -80↓ -73↓

Q2’22 -55↓ -25↓ -58↓ -50↓ -80↓ -49↓

INDUSTRIAL PROPERTY MARKET INDEX: STATES

VIC NSW QLD WA SA/NT AUS

Q2’20 -17↓ -22↓ -14↓ -56↓ -56↔ -28↓

Q2’21 -14↓ -2↓ 11↓ -39↓ -63↓ -14↓

Q2’22 3↓ 22↓ 29↓ 6↓ -56↓ 9↓

LEGEND: ↑ up since last survey ↓ down since last survey ↔ unchanged

0

-62-55

-29

12

-60

-50

-27

22

-63-58

-19

13

-49

-41

-21

-36

-67

-57 -55

-29

-63

-48

-31

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

30

Q1'20 Q2'20 Next 12m Next 2y

COMMERCIAL PROPERTY INDEX - STATE

Australia Victoria NSW Qld SA/NT WA

5

Capital growth expectations for Office property for the next 12 months fell heavily (-4.4% vs. 0.9% in Q1) and are negative in all states, led by QLD (-6.2%). Retail capital values were also revised down (-4.7% vs. -1.4% in Q1), and are very weak in all states, led by WA (-7.0%), VIC (-5.3%) and QLD (-5.3%). Steeper falls are also expected for CBD Hotels (-4.4% vs. -2.8% in Q1). Industrial values are set to fall moderately (-0.9% vs. 0.9% in Q1), with values flat in NSW.The outlook in 2 years’ time is positive for Industrial property (0.5% vs. 1.9% in Q1), with NSW (1.5%) the standout. Expectations are largely flat for CBD Hotels (-0.2%) reversing expectations for heavier falls in Q1 (-3.1%). Capital growth expectations are weakest for Office (-3.0% vs. 1.8% in Q1), and negative in all states, led by QLD (-4.1%). Heavy revisions were also noted in Retail (-2.8% vs. -0.6% in Q1), with VIC (-3.8%) and WA (-3.8%) the weakest - see page 12 for detail.

MARKET OVERVIEW - CAPITAL & VACANCY EXPECTATIONSThe national Office vacancy rate lifted to a 2-year high 8.5% in Q2, with significantly higher vacancy in VIC (7.4% vs. 4.0% in Q1) and NSW (6.7% vs. 4.9% in Q1), offsetting modest falls in QLD and WA. Despite these increases Office vacancy in these states remain much lower than the rest of the country Overall, Office vacancy is expected to climb to around 8½% in the next 2 years, mainly due to increases in VIC and NSW to above survey average levels, Overall Retail vacancy rose to a new survey high 9.0% in Q2 (6.9% in Q1), with vacancy noticeably higher in all states, particularly VIC (8.9%) and NSW (9.7%). Overall vacancy is expected to level out at 9.0% next year before easing to 8.0% in 2 years’ time.The industrial sector remains the most insulated, with vacancy falling to 5.8% in Q2 and expected to remain steady at around this rate over the next 2 years - see page 13 for detail.

0.2

-4.1-4.4

-3.0

-1.5

-5.1-4.7

-2.8

-0.1

-1.7

-0.9

0.5

-2.3

-5.4

-4.4

-0.2

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

Q1'20 Q2'20 Next 12m Next 2y

CAPITAL VALUE EXPECTATIONS (%)

Office Retail Industrial CBD Hotels

0.0

2.0

4.0

6.0

8.0

10.0

12.0

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4'10

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2'11

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4'11

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2'12

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12Q

4'12

Q1'

13Q

2'13

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13Q

4'13

Q1'

14Q

2'14

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14Q

4'14

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2'15

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4'15

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2'16

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4'16

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2'17

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4'17

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2'18

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Nex

t 12

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ext

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VACANCY RATE EXPECTATIONS (%)

Office Retail Industrial

estimates for survey period

6

As many commercial tenants continue struggling in the wake of the COVID-19 led economic downturn, the rental outlook has weakened sharply for Retail and Office property. Over the next 12 months, rents are now expected to fall -5.6% in Retail (-2.5% in Q1) and -4.5% in Office (1.4% in Q1).Rental growth is expected to continue falling in both sectors over the next 1-2 years, and in all states, with VIC most under pressure in Office markets and WA and SA/NT in Retail marketsThe outlook for Industrial rents has also softened, with rents now expected to fall -1.4% in the next 12 months (0.5% in Q1), with rents falling in all states, led by WA (-2.9%) and SA/NT (-2.5%). However, the rental slowdown is expected to be relatively short-lived, with rents flat in 2 years’ time, and a resumption of growth in QLD (0.9%) and NSW (-0.7%) - see page 12 for detail.

MARKET OVERVIEW - RENTS & SUPPLYAs the economic downturn deepens, supply over-hangs have emerged in all sectors, bar Industrial. In Q2, CBD Hotels were “quite” over-supplied and Retail and Office “somewhat” over-supplied. Office supply is most problematic in WA (“very” over-supplied), with Retail markets in SA/NT, WA and VIC “quite” over-supplied.Office markets in all states will be “somewhat” over-supplied in 3 years’ time, with most nearing “neutral” conditions in 5 years’ time (except SA/NT). Over-supply is expected to persist in Retail in the next 1-3 years, particularly in VIC (“quite” over-supplied).Industrial property is now “somewhat” under-supplied in VIC and NSW, but with QLD should balance in the next 1-5 years. Near-term supply challenges are however set to remain in SA/NT and WA. Excess supply in CBD Hotels is also expected to work out of the market in 3 years’ time, with under-supply emerging in 5 years’ time.

0.5

-4.5 -4.5

-2.9-2.4

-6.1-5.6

-3.6

-0.4

-2.1

-1.40.0

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

Q1'20 Q2'20 Next 12m Next 2y

GROSS RENTAL EXPECTATIONS (%)

Office Retail Industrial

-2.00 -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50 2.00

Current

12 months

3 years

5 years

SUPPLY CONDITIONS

CBD Hotels Industrial Retail Office

NeutralSomewhat

Over-Supplied

QuiteOver

Supplied

SomewhatUnder-

Supplied

QuiteUnder

Supplied

7

The number of property developers expecting to start new works in the next month rose to 14% in Q2 (10% in Q1), but those planning to start in the next 1-6 months fell to 30% (39% in Q1). Overall, 44% plan to start new works in the short-term (next 6 months) - below the survey average (49%). Just 13% now also plan to start new projects in the next 6-12 months (17% in Q1), and 10% in the next 12-18 months (12% in Q1). Overall a survey low 68% now plan to start new projects within the next 18 months (down from 78% in Q1 and a survey average 85%). This suggests the disruption caused by the COVID-19 pandemic has already had a major impact on the building construction industry, and will continue to impact over the next few years.

MARKET OVERVIEW - DEVELOPMENT INTENTIONSFor property developers planning to start new works, the number who indicated they were targeting residential developments fell to 46% (51% in Q1), and was well below the survey average (53%).NAB also sees dwelling investment falling around 15% over the next year or so before levelling out in mid-2021. High rates of completion are likely to rapidly erode the pipeline of new dwellings while uncertainty in the housing market will see caution in new commitments going forward. In other sectors , intentions were broadly unchanged for Office (15% vs. 14% in Q1) and Retail property (15% vs. 14% in Q1). However, almost twice as many developers said they were looking at starting new Industrial projects (10% vs. 6% in Q1).

13%

26% 27%

17%

13%

10%

39%

17%

12%

19%

14%

30%

13%

10%

22%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Next mth Next 1-6mths

Next 6-12mths

Next 12-18mths

Longer timeframe

COMMENCEMENT INTENTIONS - TIME

Q2'19 Q1'20 Q2'20

0%

10%

20%

30%

40%

50%

60%

70%

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1'13

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1'14

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1'15

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1'16

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1'17

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3'17

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1'18

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3'18

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1'19

Q2'

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3'19

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1'20

Q2'

20

COMMENCEMENT INTENTIONS - SECTOR

Office Retail Industrial Residential

8

In line with the falling number of developers planning to start new works in the next 6 months, the number of developers planning to source more capital to fund them in this time period also fell further to 21% in Q2 (22% in Q1). Around 63% had no intention to source capital in the short-term (60% in Q1 and 59% in Q2’19).The number planning to source capital in the next 6-12 months rose slightly to 22% (20% in Q1), but 54% had no intention to source funds (51% in Q1).More developers also intend to source more capital in the next 12-24 months (27% vs. 24% in Q1), while the number who were unsure also fell to 34% (from a survey high 38% in Q1).

MARKET OVERVIEW - LAND SOURCES & CAPITAL INTENTIONSThe number of property developers looking to use land-banked stock for their new projects rose to an above average 65% in in Q2 (56% in Q1 and 63% at the same time last year).The number of property developers who said they were seeking new acquisitions also rose sharply to 24% (from 17% in Q1 and 20% at the same time last year). It is however still below the survey average level (26%). The number looking at refurbishment opportunities fell sharply to 9% (up from a survey high 19% in Q1 and 14% at the same time in 2019). It is now also below average (11%).

0

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2'12

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12Q

4'12

Q1'

13Q

2'13

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13Q

4'13

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14Q

2'14

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14Q

4'14

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SOURCES OF LAND DEVELOPMENT (%)

Land-Banked Stock New Acquisitions Refurbishments

24 22 2128

20 2230

24 27

59 60 63 4851 54 38

3939

17 18 16 24 29 24 32 38 34

0%

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40%

60%

80%

100%

Q2'

19

Q1'

20

Q2'

20

Q2'

19

Q1'

20

Q2'

20

Q2'

19

Q1'

20

Q2'

20

INTENT TO SOURCE MORE CAPITAL FOR DEVELOPMENT/ACQUISITIONS/PROJECTS

Yes No Not Sure

Next 6 mths 6-12 mths 12-24 mths

9

With market uncertainty persisting, the average pre-commitment to meet external debt funding requirements for new developments across Australia in Q2 rose significantly in both residential (65.6% vs. 62.1% in Q1) and commercial (61.2% vs. 56.6% in Q1) property. Residential requirements rose in all states bar WA. They were highest in VIC (68.3%) and WA (67.3%), and lowest in QLD (60.5%). Commercial pre-commitments also rose in all states bar QLD. VIC (68.1%) was highest and QLD (51.9%) lowest - both by some margin.On balance, there was a big rise in the net number of property expects expecting requirements to worsen than improve going forward - a net -30% for residential in the next 6 months and -17% in 12 months’ time (-12 & -1% respectively in Q1), and -31% in 6 months and -15% in 12 months for commercial (-7% & +6% in Q1).

MARKET OVERVIEW - FUNDING & PRE-COMMITMENTSProperty experts indicated that debt funding conditions were more difficult in Q2, with the net number who said it was harder to obtain borrowing or loans (debt) needed for their business out-weighing those who said it was easier rising to -27% (from -17% in Q1).The net number who said it was harder to obtain equity funding also increased to -25% (-15% in Q1), as equity markets continued to fluctuate in these uncertain times. The outlook for debt and equity funding conditions in the next 3-6 months are now also weaker than predicted in the previous survey.A net -26% indicated it will be harder to obtain debt (-16% in Q1), and -28% said it will be harder to obtain equity financing (-14% in Q1) in the next 3-6 months.

-50

-40

-30

-20

-10

0

10

20

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10Q

2'10

Q3'

10Q

4'10

Q1'

11Q

2'11

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11Q

4'11

Q1'

12Q

2'12

Q3'

12Q

4'12

Q1'

13Q

2'13

Q3'

13Q

4'13

Q1'

14Q

2'14

Q3'

14Q

4'14

Q1'

15Q

2'15

Q3'

15Q

4'15

Q1'

16Q

2'16

Q3'

16Q

4'16

Q1'

17Q

2'17

Q3'

17Q

4'17

Q1'

18Q

2'18

Q3'

18Q

4'18

Q1'

19Q

2'19

Q3'

19Q

4'19

Q1'

20Q

2'20

Nex

t 3-

6m

EASE OF ACQUIRING DEBT/EQUITY (NET)

Debt Equity

62.1 63

.3

63.5

53.4

70.0

56.6

54.7

54.6 56

.0

65.6

65.6 68

.3

66.1

60.5

67.3

61.2

68.1

61.3

51.9

64.7

40

50

60

70

80

AUST VIC NSW QLD WA AUST VIC NSW QLD WA

PRE-COMMITMENT REQUIREMENTS (%)

Q1'20 Q2'20

Residential Commercial

10

The COVID-19 pandemic has had a sudden and significant impact on commercial property markets across the globe. In this survey, we asked our panel of property experts how they expect Office markets will change in Australia due to the impact of COVID-19.Overwhelmingly, the biggest changes according to around 8 in 10 experts are the continuation or extension of working from home and in structural changes as to how office space is used, for example by re-designing space to maintain social distancing and reduced workplace density. The next biggest impacts on the market are expected to play out in a slow down in leasing volumes and renewals (68%) and cashflow reductions stemming from businesses’ ability to continue to operate and pay rent, and how this will impact investors’ mindset (60%).Only 2% of property experts believe that conditions will return to pre-Covid-19 patterns. But opinions do vary by state. For example, almost 9 in 10 property experts in NSW see a continuation or extension of working from home, compared to just 7 in 10 experts in WA. More property experts in VIC (74%) pointed to a slow down in leasing and renewal volumes as a key impact than in other states, and those in QLD (85%) from reduced cash flows. Increased re-design costs were identified as a key impact by far more property experts in NSW (55%), and a return to the “corner office” in WA (43%) - see table below for full state details.

SPECIAL QUESTION: HOW WILL OFFICE MARKETS CHANGE

Overall VIC NSW QLD WA SA/NT

Continuation/extension of remote working (i.e. working from home) 80% 74% 87% 85% 71% 75%

Structural changes to how space is used (e.g. reduced workplace density, re-designing space to maintain distancing measures) 76% 68% 87% 70% 57% 75%

Slowdown in leasing volumes and renewals 68% 74% 68% 65% 71% 63%

Reduction in cash flow/security of income due to tenants’ ability to continue to operate & pay rent and impact on investor mindset 60% 63% 61% 85% 0% 38%

Increased costs associated with redesigning workplaces for post-pandemic environment 40% 37% 55% 35% 14% 25%

Greater dispersion of office buildings across metro areas (rather than very high concentration in CBD) 31% 42% 35% 40% 0% 0%

Tenants demanding increased amenities (e.g. better lounge areas, green spaces etc.) 26% 21% 32% 20% 14% 38%

Move away from open plan offices and the return of ‘the corner office’ 22% 16% 16% 20% 43% 38%

Other 9% 11% 6% 5% 14% 25%

No change - conditions will return to pre-COVID patterns 2% 0% 0% 0% 14% 13%

2%

9%

22%

26%

31%

40%

60%

68%

76%

80%

0% 20% 40% 60% 80% 100%

No change - conditions will return to pre-COVIDpatterns

Other

Move away from open plan offices and the return of ‘the corner office’

Tenants demanding increased amenities (e.g.better lounge areas, green spaces etc.)

Greater dispersion of office buildings across metroareas (rather than very high concentration in CBD)

Increased costs associated with redesigningworkplaces for post-pandemic environment

Reduction in cash flow/security of income due to tenants’ ability to continue to operate & pay rent

and impact on investor mindset

Slowdown in leasing volumes and renewals

Structural changes to how space is used (e.g.reduced workplace density, re-designing space to

maintain distancing measures)

Continuation/extension of remote working (i.e.working from home)

% of total responses (multiple responses allowed)

HOW WILL OFFICE MARKET CHANGE DUE TO IMPACT OF COVID-19 PANDEMIC?

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Even before the COVID-19 pandemic hit, the Retail commercial property sector was already facing a number of challenges, including persistently weak consumer spending and growing demand for online Retail encroaching on traditional bricks and mortar businesses.The onset of the COVID-19 pandemic has now added to these challenges, with government-mandated shutdowns, social isolation, shifts in consumer behaviour towards internet shopping, rising joblessness, weak income growth and general economic uncertainty further weighing on the sector.With most bricks-and-mortar retailers also suffering heavy sales losses since the pandemic hit, many have been forced to seek rental relief.According to a recent report from the Shopping Centre Council of Australia (SCCA), the national industry group for shopping centre owners, more than 150 rent relief deals are being reached per day between shopping centre owners and small to medium enterprise tenants, covering 45% of retailers to date and more are working through discussions.Not surprisingly, many commercial landlords have also reported an increase in missed rent payments.Against this background we asked our panel of property experts operating in the Retail space what impact the COVID-19 pandemic had on rent collections across different Retail property formats.

SPECIAL QUESTION: IMPACT ON RETAIL RENT COLLECTIONS

2%7%

8% 8%

21%

30%

2%

16% 14%

32%

26%

17%

20%

42%

26% 17%

45%

43%

24%

22%

5% 13%

9%

24%

20%

8%

45%

5%12%

6%

16% 13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Strip Regionalshoppingcentres

Neighbourhoodshoppingcentres

Large formatretail

Bulky goods Other

IMPACT OF COVID-19 ON RETAIL RENT COLLECTIONS

Increase No change Down 0-10% Down 10-30% Down 30-50% Down 50% plus DK

Collections have been impacted across all Retail formats, but some have struggled to meet their commitments more than others. Bulky Goods Retail and Large Format Retail look to have held up best, with 30% and 21% of property experts reporting no change in collections from these formats. This compares to just 7-8% from Neighbourhood and Regional Shopping Centres and in Strip Retail.In other key take-outs, rent collections were down 0-10% according to 32% of property experts from Large Format Retail and 26% from Bulky Goods. Over 4 in 10 said collections were 10-30% lower from Neighbourhood Shopping Centres (42%) and Other (45%), or almost twice as many as in any other Retail format. Collections were also 30-50% lower from significantly more Strip Retailers (43%), and were down 50% or more from 45% of Other Retailers, 24% from Strip Retailers and 20% from Regional Shopping Centres.

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SURVEY RESPONDENTS EXPECTATIONS (AVG) Q2-2020OFFICE CAPITAL VALUES (%)

VIC NSW QLD WA SA/NT AUS

Q1’20 -3.6 -3.0 -5.4 -5.9 -5.2 -4.1

Q1’21 -4.8 -3.1 -6.2 -5.1 -3.4 -4.4

Q2’22 -3.7 -1.3 -4.1 -3.1 -4.0 -3.0

INDUSTRIAL CAPITAL VALUES (%)

VIC NSW QLD WA SA/NT AUS

Q1’20 -1.4 -1.6 -1.6 -2.6 -2.2 -1.7

Q1’21 -1.1 0.1 -0.5 -2.7 3.8 -0.9

Q2’22 -0.1 1.5 0.7 0.5 -2.0 0.5

RETAIL CAPITAL VALUES (%)

VIC NSW QLD WA SA/NT AUS

Q1’20 -5.5 -4.5 -5.6 -6.5 -1.5 -5.1

Q1’21 -5.3 -3.1 -5.3 -7.0 -2.4 -4.7

Q2’22 -3.8 -1.5 -5.0 -3.8 -2.4 -2.8

OFFICE RENTS (%)

VIC NSW QLD WA SA/NT AUS

Q1’20 -4.3 -4.6 -4.6 -5.9 -3.9 -4.5

Q1’21 -4.9 -5.0 -4.1 -4.5 -3.2 -4.5

Q2’22 -4.2 -2.9 -2.9 -1.0 -2.7 -2.9

RETAIL RENTS (%)

VIC NSW QLD WA SA/NT AUS

Q1’20 -5.9 -5.6 -5.8 -8.0 -7.3 -6.1

Q1’21 -6.2 -4.5 -5.0 -7.9 -7.3 -5.6

Q2’22 -4.8 -1.3 -3.6 -5.5 -6.8 -3.6

INDUSTRIAL RENTS (%)

VIC NSW QLD WA SA/NT AUS

Q1’20 -1.0 -2.4 -2.6 -3.0 -2.0 -2.1

Q1’21 -1.0 -0.9 -1.1 -2.9 -2.5 -1.4

Q2’22 -0.1 0.7 0.9 -0.6 -2.9 0.0

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SURVEY RESPONDENTS EXPECTATIONS (AVG) Q2-2020OFFICE VACANCY RATE (%)

VIC NSW QLD WA SA/NT AUS

Q1’20 7.4 6.7 10.1 13.6 10.5 8.5

Q1’21 8.5 8.3 11.0 13.3 10.3 9.5

Q2’22 8.4 7.6 10.9 12.1 10.0 9.1

INDUSTRIAL VACANCY RATE (%)

VIC NSW QLD WA SA/NT AUS

Q1’20 4.2 5.7 6.1 8.7 6.2 5.8

Q1’21 5.7 5.8 6.6 7.0 4.5 5.9

Q2’22 5.4 5.4 6.4 5.9 4.5 5.6

RETAIL VACANCY RATE (%)

VIC NSW QLD WA SA/NT AUS

Q1’20 8.9 9.7 8.0 8.7 10.6 9.0

Q1’21 9.7 8.2 8.4 9.7 11.4 9.0

Q2’22 8.5 6.6 7.8 9.0 11.8 8.0

NOTES:Survey participants are asked how they see:

•capital values;•gross rents; and•vacancy rates

In each of the commercial property markets for the following timeframes:

•annual growth to the current quarter•annual growth in the next 12 months•annual growth in the next 12-24 months

Average expectations for each state are presented in the accompanying tables.

*Results for SA/NT may be biased due to a smaller sample size.

ABOUT THE SURVEYIn April 2010, NAB launched the first NAB Quarterly Australian Commercial Property Survey with the aim of developing Australia’s pre-eminent survey of market conditions in the commercial property market.The large external panel of respondents consists of Real Estate Agents/Managers, Property Developers, Asset/Fund Managers and Owners/Investors.Around 370 property professionals participated in the Q2 2020 Survey.

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CONTACT THE AUTHORSAlan OsterGroup Chief Economist Alan.Oster@nab.com.au+613 8634 2927

Dean PearsonHead of Behavioural & Industry Economics Dean.Pearson@nab.com.au+613 8634 2331

Robert De IureSenior Economist - Behavioural & Industry Economics Robert.De.Iure@nab.com.au+613 8634 4611

Brien McDonaldSenior Economist - Behavioural & Industry Economics Brien.McDonald@nab.com.au+613 8634 3837

Important NoticeThis document has been prepared by National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 ("NAB"). Any advice contained in this document has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice in this document, NAB recommends that you consider whether the advice is appropriate for your circumstances. NAB recommends that you obtain and consider the relevant Product Disclosure Statement or other disclosure document, before making any decision about a product including whether to acquire or to continue to hold it. Please click here to view our disclaimer and terms of use.