Office values record worst quarterly decline since 2009

Oksana Patron

14 July 2023

The Australian Core Wholesale Property Funds Index recorded negative total return in the second quarter of 2023 as office values posted worst quarterly decline since 2009, according to the MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index.

Benjamin Martin-Henry, Head of Real Assets Research, Pacific at MSCI, stressed that after months of speculation about when the market would see significant falls in value for the office sector, they finally arrived.

“The one-month capital growth for June alone came in at -5.2%, which drove the worst 12-month total return since early 2010,” he said.

The overall quarterly total return for the Index was -2.8% for Q2’23 but the office funds were the recorded a -5.2% fall in capital growth, as values started to see some significant adjustments.

At the same time, retail funds recorded capital growth of -3.4% for the quarter, however industrial managed to continue to buck the trend and recorded positive capital growth of 0.8%.

Office funds recorded an annual total return of -4.4%, comprising of negative capital growth of -7.9% and an income return of 3.7%.

However, as expected, the industrial funds were the stand-out performers, but with a total return of 6.0%, they are well off the pace of 12 months ago when total return came in at 20.4%.

Whilst the retail funds performed better than their office counterparts, annual capital growth of -4.0% is an almost complete reversal of the 3.9% recorded 12 months ago.