Australia's economic growth drivers have shifted from mining to housing, however, the housing sector is now slowing, leaving the question of where will growth come from. Indications are the service sector is beginning to take up the slack. Here we analyse how this transition may impact Australia's office, retail and industrial property sectors.
The office markets most sensitive to interest rate and currency movements are Sydney and Melbourne. Demand from technology, professional services and finance sectors has increased strongly in these markets and is expected to remain solid over 2016. Demand growth should also begin to improve in 2016 in other CBD markets as service growth spreads to tourism and education.
Firmer growth in the service sectors should translate into stronger discretionary sales growth. This should benefit shopping centres with a higher proportion of discretionary categories such as regional and sub-regional shopping centres.
Logistics and warehouse property should profit from increased demand associated with stronger retail sales. Demand is likely to be strongest in service orientated areas like Sydney and Melbourne, though demand should flow to other locations as general economic growth improves.
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