The occupier and investment sentiment in Australia’s commercial market remained “close to zero”, according to the latest Australia Commercial Property Monitor from the Royal Institution of Chartered Surveyors (RICS).

The decline doesn’t necessarily mean a contraction, but means entering into a period of slower growth, said Sean Ellison, RICS Asia-Pacific senior economist and the report’s author.

The markets in Brisbane, Melbourne, Perth, and Sydney could still expect a rise in rents and capital values. However, it would be in the low single digits and substantially slower than in the past, with the present situation “not a sharp correction,” according to Ellison.

The risks in the global macro environment in the past 12 months contributed to the downturn, including attempts by central banks to offset slower growth from trade and a slowing China, he said.

“Without a very large external negative shock, it will be tough to envision a sharp contraction because we’ve seen a fairly quick response from policymakers like the RBA in Australia, where interest rates have been cut a couple of times now. Even when you have this sort of slower growth, it’s not really sapping the demand from commercial real estate,” he said.

Brisbane and Sydney’s markets experienced the sharpest drop in demand, according to the survey.

The occupier demand for office space in Brisbane went from “growing modestly to basically flat,” while in Sydney the “fairly robust growth” dropped to a more moderate growth rate, Ellison said.

However, the increase in supply was a more prominent factor in the cautious outlook than cooling demand, he said.

The increased supply in Sydney and Melbourne had varying impacts, with Melbourne seeing stronger expectations in both rental growth and value growth, according to the survey.

The capital values and commercial property rents in Sydney were projected to grow by 0.4% and 1.3%, respectively. In Melbourne, the respective projections were 1.3% and 1.6%, the survey showed.

“There is a sense that Melbourne is in a slightly earlier phase in the cycle so whereas Sydney is seen as being in the earlier phase of a slowdown,” Ellison said.