As we prepare to move into a new financial year, my latest newsletter provides an overview of how the economy and commercial property market are performing:

Economy sending mixed signals
Commercial property stabilising
Consumers reluctant to spend
Investors eye up parking assets

Economy sending mixed signals

The Reserve Bank of Australia (RBA) has flagged weakening household spending and easing inflation, even as the labour market remains tighter than expected.

In the minutes from its May monetary policy meeting, the RBA said that growth in early 2025 was broadly in line with earlier forecasts, but consumption had been “a little lower than expected”, partly due to the economic disruption caused by flooding in Queensland and New South Wales. However, it also cited “underlying momentum” as weaker than previously assumed.

The Board noted a clear improvement on inflation. Trimmed mean inflation had returned to the target range for the first time since 2021 and services inflation had moderated. “There has been welcome progress towards the Board’s objectives,” the RBA said.

Commercial property stabilising

The Australian commercial property market is showing early signs of stabilising, with MSCI data revealing solid results in the March quarter, according to Ray White Group Head of Research Vanessa Rader.

“The all property market’s 1.01% total return suggests we may be approaching the bottom of the cycle,” Ms Rader said. “Income returns remain strong, providing cashflow support as capital values continue adjusting.”

Retail emerged as the top performer in Q1, recording a 5.73% total return. Sub-regional shopping centres led the way with 8.34%, followed by regional centres at 6.74%. “Retail is evolving into the new ‘bricks and clicks’ leader,” Ms Rader said, noting strong occupancy and limited new supply.

Consumers reluctant to spend

Businesses are under pressure as consumer spending stagnates and productivity declines.

The most recent Australian Bureau of Statistics data found that household spending in April was 0.1% higher than the month before while retail spending was 0.1% lower.

Meanwhile, productivity (as measured by GDP per hour worked) fell 1.0% year-on-year.

Investors eye up parking assets

Commercial parking facilities – long considered safe, low-growth investments – are coming under renewed scrutiny as CBD patterns evolve post-pandemic.

Ray White Group’s Head of Research, Vanessa Rader, said changes in office attendance, transport habits and broader economic shifts were reshaping the asset class.

“Parking assets have historically been tightly held and rarely traded,” Ms Rader said. “But over the past year, we’ve seen a wave of sales, particularly in Melbourne, where there’s growing speculation about long-term returns.”