Boston, MA -- (ReleaseWire) -- 09/11/2012 -- The Australia Real Estate report examines the Commercial Office, Retail, Industrial and Construction segments in the context of a sector which is structurally balanced. With a focus on the principal cities of Melbourne, Sydney, Brisbane and Perth, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of the country's resources boom.
The Australian commercial real estate market continues to be fairly balanced because, structurally, the industry functions in a way that restricts overdevelopment. It operates in an economy that, despite weak consumer sentiment and structural changes, is performing reasonably well. The economy and sector are underpinned by resources and demand from China, a reducing threat of interest rate rises, low unemployment and a strong infrastructure sector. We caution, however, that our outlook for the economy in 2012 is bearish, and the country will be negatively affected by the expected slowdown in Chinese economic growth.
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Having consulted our in-country sources in July 2012, with newly collected data covering the first six months of the year, we can confirm that while rents in some regions experienced strong growth, it seems our view for a slowdown in Australia's economic growth has already started to play out although the office sector seems to be resisting this trend for the time being.
- There is a resources boom in Australia at present, built significantly but not entirely on exports to China. This is putting money into the economy and bolstering downstream industries.
- After looking through the figures, though, it seems that the brunt of Australia's growth weakness will be felt in 2013, rather than 2012. As such, while keeping our outlook for a H212 recession unchanged, we have bumped up our growth figure for this year, from 0.8% to 2.1%, while more than offsetting this by a reduction in our 2013 forecast, from 3.0% to 0.9%.
- Leighton is confident that it will meet its net profit forecast of AUD400-450mn for the calendar year of 2012. We note however that the company still faces several headwinds over the course of 2012 (i.e. risk management issues, potential project delays, losses from Middle East operations, and falling orders from the Australian mining sector). These concerns are not only likely to make it difficult for Leighton to meet its 2012 profit forecast based on its operations alone, but could also cap any upside potential on its stock price in 2012.
- We believe that the economic slowdown in China is dampening capital expenditure for mining and infrastructure projects in Australia. This is a major downside risk to the construction sector and we have revised down our 2012 real growth forecast accordingly, from 1.5% to 0.5%.
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