Australian Property News

Australia’s commercial property recovery will be quicker than USA

Posted on Friday, December 17 2010 at 6:15 PM

Commercial real estate in the United States of America could be on the verge of recovery, according to a Deloitte report.

The sector experienced sharp declines and painful deleveraging in the wake of the financial and economic turmoil, but there are signs that the deterioration of industry transactions and fundamentals has begun to plateau, and that early stages of recovery may be imminent.

Deloitte Real Estate partner in Australia Alex Collinson says the report's findings reflect the local market, but he notes that Australia has had a shallower and shorter dip than the US, with lower vacancies, and there are signs that the rental recovery will be quicker than in the US.

"Australia and the Asia Pacific region are leading the global real estate investment recovery," he says.

"While not at 2007 levels, transactional activity is returning. Amend and extend is how debt is now being treated. Debt maturities have resulted in 'haves and have nots' in terms of access to debt."

Despite some encouraging activity in the US, the Deloitte report warns that there are some impediments, such as looming debt maturities and high unemployment rates. They're causing uncertainty, potentially dimming prospects of a robust, short-term rebound in commercial real estate.

Collinson says there's scope for inbound investment in the US commercial real estate market if the recovery gathers pace, but the lessons of the previous investment cycle need to be learned.

"It's a bit of a wait-and-see approach at the moment," he explains. "The signs are encouraging. However, we require further indicators in the next six months in order to establish whether the momentum gathers pace or peters out."