Economic rents are expected to increase over 2022 and 2023

The Australian Bureau of Statistics (ABS) is a venerable mine of information. Last week I was looking at their monthly business turnover indicator – an experimental indicator of business turnover derived from monthly Business Activity Statements.

The experimental indicator reported rises in business turnover for all 13 of the published industries in February 2022 (seasonally adjusted). Sitting in the top three industry sectors for the February data was construction – an industry sector where we have seen a number of high-profile liquidations in 2022.

The construction sector is being impacted by a confluence of factors. Labour, material and financing costs have escalated, while COVID related issues have led to delays in project timelines.

We believe that the construction sector is experiencing cost push inflation and a lack of clarity on future price movements. As a result, economic rents in the commercial real estate sector are expected to move higher over 2022 and 2023.