Majority of experts polled tip Melbourne office market to boom
The Melbourne office market will be the strongest office market in 2011, according to commercial property experts.
Six out of eight experts polled by the Property Council of Australia say Melbourne will offer investors the greatest total return, with only one selecting Perth and another picking Sydney.
The most bullish prediction comes from Frank Gelber, chief economist at research group BIS Shrapnel, who forecasts Melbourne office demand at 98,000 square metres, rental growth at 15% and capital growth of 15% for a total annual return of 21%.
“This is just the beginning of what will be a boom,” Gelber says.
“Demand recovery is on track. Net absorption will increase. Supply is constrained for the next three years at least. Vacancy rates will tighten and rents will start driving values, and yields will start to firm.”
Opteon Property Group research manager Richard Jenkins forecasts a total return of 18% in Melbourne, and he says 75,000 square metres of office space will be needed in 2011.
Jenkins expects strong rental growth (12%) to be aided by the “limited amount of uncommitted new supply currently under construction and growing business confidence”.
The Melbourne market is set to offer total returns of up to 15.5% with rental growth of 5% and capital growth of 8.2%, according to Frank Allen, director of property markets at Westpac.
“Continued healthy economy and limited new supply will drive vacancy lower and rents up over 2011,” says Allen, who forecasts total office space demand of 75,000 square metres.
The two experts who disagree about Melbourne’s bullish chances are David Green-Morgan, head of Australian research at DTZ, and Jatin Chand, senior forecasting consultant at CB Richard Ellis. Green-Morgan says Perth will be the best-performing office market, thanks to a turnaround in commodity markets, and Chand tips Sydney to outperform other capital cities.
“The Sydney CBD is forecast to bounce back strongly in the second half of 2011 as the banking and finance sector is expected to rebound strongly from June 2011 onwards,” Chand says.
Australia’s hottest office market in 2011
Expert | Prediction | Demand (sqm) | Total return | Rental growth | Incentives | Capital growth |
Frank Allen, Westpac | 75,000 | 15.5% | 5% | -3% | 8.2% | |
Nerida Conisbee, Colliers | 46,000 | 7% | 12% | 0% | 7.7% | |
Frank Gelber, BIS Shrapnel | 98,000 | 21% | 15% | -6% | 15% | |
Matt Whitby, Knight Frank
| 70,000 | 16% | 7% | -2% | 9% | |
Richard Jenkins, Opteon | 75,000 | 18% | 12% | -2% | 11% | |
Martin Pepper, Property Intelligence | 80,00 | 12% | 7.5% | -5% | 8% | |
David Green-Morgan, DTZ | Perth | 17,000 | 14.9% | 3.7% | -5% | 7.1% |
Jatin Chand, CB Richard Ellis | Sydney | 103.000 | 15.7% | 7% | -7.2% | 9.6% |
Source: Office market forecast, Property Council of Australia
