CBD office rental markets improving in Brisbane, Adelaide and Perth: Colliers
CBD markets for capital cities, bar Sydney and Melbourne, are seeing improving rental conditions though their growth rates are low compared to the two biggest cities, according to Colliers International’s CBD Office research and forecast report.
Sydney and Melbourne have benefitted from a “hold on supply” and consistently strong demand, pushing office rents higher and higher.
Over the year to June 2017, prime grade face rents grew by 7.8 per cent in Sydney, and 14 per cent in Melbourne.
Population growth in New South Wales and Victoria has been the key catalyst in the market’s “perfect storm” conditions, with migration figures well above their 10-year averages in both states fuelling strong white collar job creation – but the Colliers report revealed that office supply will be constrained during this time of strong demand.
Colliers International’s national director of Research, Anneke Thompson, said office supply for the next 12 months was “even more ominous”.
“We’re forecasting the Sydney CBD office market to contract by 50,000 sqm throughout the year to July 2018, and the Melbourne CBD to reduce by circa 5,000 sqm, based on the supply that we know will enter the market and forecast withdrawals,” she said.
The story is not as bright for other capital cities.
Brisbane appears to be in recovery mode, with a solid level of premium and A-grade office leasing deals completed throughout the first half of 2017, Colliers noted.
In line with this comeback, the vacancy rate is forecast to decline to 13-14 per cent by January 2019.
A major development was QSuper signing a heads of agreement with Shayher Group to negotiate a lease for its 300 George Street office building, which is due for completion mid-2019.
In Adelaide, vacancy is starting to fall with the market recording its highest net absorption figures since January 2014.
Net absorption in the six months to July was 4,624 sqm, while the annual figure was 6,016 sqm.
This has seen vacancy fall ever so slightly to 16.1 per cent, down from 16.2 per cent in January 2017, said Colliers.
The small decline can be partially attributed to the remainder of the recently refurbished 1 King William Street being added back into supply.
Meanwhile, Perth CBD is also seeing some stability in the office leasing market, with vacancy falling to 21.1 per cent.
Net absorption is being driven by tenants’ flight to quality and new investment spend into increasing Western Australia’s output capacity of iron ore.
