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Global economic downturn hitting Oz commercial property hard

According to the latest figures more than 3,400 projects, including apartment towers, office buildings, shopping centres and hotels, have been delayed. This is five times the number of projects that were deferred in 2007, the figures from Reed Construction Data show.

Property group Becton says it will reduce its portfolio from 37 projects to 10, while Brisbane developers Metacap, Austcorp and APH have delayed projects worth more than $2 billion combined.

The situation is affecting public and private projects. The New South Wales Government has also delayed submissions on the $4 billion Barangaroo project, due to what Planning Minister Kristina Keneally described as 'extraordinary volatility in global financial markets'.

Managing director of Reed Construction Data, Rob Wild, said the main reason behind the slowdown is obtaining credit. 'Developers like to get a pre-commitment, especially in flats and units, of something in the order of 70% to 75%, right now that's difficult. Companies may not be able to get the finance and may not be able to support the finance even if they do get it,' he explained.

'The developers themselves are also having trouble raising money. Even if they are successful, there is a lot of uncertainty. I do think a lot of these projects will come back next year, and if the credit market starts to free up a bit. But at the moment they're hesitant,' he added.

More projects were started in 2008 than in 2007 but five times as many have been deferred and new projects that came on stream for 2008 totalled $198 billion, down from $236 billion in 2007.

Some are hesitant to predict that things will get any better in 2009. David Green-Morgan, research director at DTZ Research, said he does not expect to see a recovery in commercial property for 12 to 18 months.

'If a building or a development hasn't already started or already doesn't have a significant pre-commitment in place, I doubt if we’ll see construction in 2009. We’re looking at the beginning of 2010 at the earliest.