KPMG - Australian real asset economy market update

This report provides valuable insights into the current state of the commercial property market in Australia. The report highlights that the Australian economy is entering a softer growth phase due to domestic and global headwinds. Despite this, solid economic growth and a tight labor market are supporting occupational demand in the core commercial property sectors, except for office property which is experiencing softer demand. The report also notes that asset pricing dynamics have started to turn, with capitalization rates softening across key property sectors. This is largely due to rising market interest rates, which are adversely affecting capital market conditions in the commercial property sector. As a result, asset revaluations are beginning to move down, and investment performance for commercial property has started to moderate, with total returns across the three core property sectors softening. Despite the challenges posed by the pandemic, the report suggests that the Australian economy remains resilient and is expected to enter a cooling phase rather than a recession. This is in contrast to other developed economies, which may see their economies contract over the next 6-12 months. Overall, the report provides a comprehensive overview of the current state of the commercial property market in Australia and highlights the key factors influencing its performance.