Three key impacts of global trade wars on Australian office markets
Recent data is reflecting synchronised strength and/or improving performance across Australia’s major CBD office markets. In particular, Australia’s global gateway cities of Sydney and Melbourne are leading the charge with CBD office markets that are pushing new 10-year highs in market conditions
. This has in part been driven by positive momentum in both domestic and global economic growth.
However, the recent escalation in global trade tensions, as a result of the US imposing higher tariffs on imports from China, European Union, Canada and Mexico, creates some uncertainty
about the ongoing stability of economic growth and the strong fundamentals supporting Australia’s major office markets.
While we are not forecasting the full impact of this scenario to play out in the coming years
, the following points highlight how global trade wars are likely to shape Australian office market conditions.
Key impacts on Australian office markets:
- Global growth: tighter regulation of global trade flows is likely to weaken both global and domestic economic growth, employment and demand for office space.
- Input and output prices: higher tariffs on bulk commodity markets drive price increases in development material costs and create inflationary pressure.
- Capital markets: weaker investor sentiment softens global capital flows, softening cap rate compression.