Media experts evaluate Australia’s latest reporting season trends in the property sector

Reporting season is an important time of year when hundreds of Australian companies announce their half-year results. Most importantly, this includes a list of ASX-listed property stocks. 

With this latest information on hand, CBRE invited the country’s top media experts in property for their take on the numbers and trends across key areas of the commercial sector. 

Here’s what the Australian Financial Review’s columnist Robert Harley, The Australian’s commercial property editor Ben Wilmot, and the Sydney Morning Herald’s commercial property editor Carolyn Cummins had to say about this season's most influential topics. 

Riding the high of shopping centres and retail stocks 

Despite the current cost of living crisis, Robert Harley still sees an upside in retail stocks and shopping centres.  

“They are getting more rent, and the retailers are paying, even though the sales have moderated a little bit,” he says. 

“All the big box retailers want more space. So, it's not just that the market is going better, the retailers are actually expanding.” 

Harley notes that Scentre Group, which owns and operates the Australian and New Zealand Westfield shopping centre portfolio, has seen its distribution pay out increase by 5% for the year alongside a forecasted increase for the following year. 

Carolyn Cummins agrees and can attest to this positive retail outlook. 

“I think it also shows the potential of curating - and Westfield particularly have done it so well. Shopping centres are now experiences and the retailers that are going well are the ones that are interactive.  

“The destination centre is what a shopping centre is. Think Melbourne’s Chadstone which has a hotel and office towers. They're becoming their own little eco-environment instead of just a shopping centre with a big box at the end. A lot of them now fashion themselves as sort of a showcase and a front store, and then if you want to buy something you can get it online.  

Ben Wilmot adds that local retailers shouldn’t be forgotten in the equation. 

“I think the local retailers have cracked the code a little bit with omnichannel retailing. I was worried about the continual rise of Amazon, which is obviously helping the logistics and industrial sector, but looking closely at some of those retail results, I think it's flowing through to their leasing demand as well. 

“There are now online-only retailers going into malls and there is expansion of traditional retailers as well. I think Australia is looking pretty good on a world stage in doing that.”  

The outlook on office performance 

While office valuations have seen their fair share of challenges in recent years, the new reporting season could bring with it some fresh and unexpected insights. 

Harley says that much of the commentary around office assets have been negative in the past though some believe valuations could be reaching the very bottom. 

“That might be premature,” he says. “We're going to have to see some transactions to prove that we're actually at the bottom of it. 

“The valuations follow. They are actually a lagging indicator.”  

When it comes to offshore investor interest in the sector, Harley highlights two opposing views. 

“One is that Australia's looking good. The other is that there are a whole lot of really good buys elsewhere around the world.” 

In Cummins’ opinion, it's a situation similar to a “Mexican standoff”. 

“The assets are good to buy, but what the owners want and what the buyers are willing to pay is a gap that just doesn't seem to be narrowing,” she says. 

Where the media analysts do see positivity is in the appeal and strength of premium office assets.  

“If you look at that core part of the CBD, particularly in Sydney, that [vacancy] is fine. Go out to Parramatta, look at the B and C class assets and it’s 40 percent empty,” says Harley.  

“And places like St Kilda Road in Melbourne is just dying,” adds Cummins.  

“Because they're saying that Cremorne is draining people out of St Kilda Road and they're all such old buildings that nobody wants to go into them. You can get a nice rent in a good shiny building as opposed to something that's falling to bits. The office managers are opting for that.”  

“There were some numbers about people taking less space or the same space, but no one's taking more space. So maybe they move into a better space, take less space, and are prepared to pay the same figure for it. But the incentives are huge,” says Harley. 

Industrial & Logistics: The ongoing bull run 

The Industrial & Logistics sector has been one of the powerhouses in Australia for a while, particularly when it comes to rental growth. Will this still be the case moving forward based off the latest reporting season data?  The answer from the media's property analysts is a conditional ‘yes’.  

“Data centres are the growth engine they all talk about. I think that the internet services we all use won't decline,” says Cummins. 

“I think they can reimagine what is inside a shed as opposed to just being things whizzing around on a conveyor belt. They're now looking at where they can use these big boxes for new use through adaptive reuse.” 

Wilmot does however note an important distinction in the property type which must be considered. 

“There's a split between the very latest ones and the older ones, and the companies that have done well to curate the more modern ones could be the beneficiaries going forward. 

“If we have companies that are not in the listed sector who have the older assets, they're the ones that would be exposed if anything negative was going to happen. The modern ones are less likely.”  

Audiences can listen to this full conversation via CBRE's Talking Property podcast.