Cushman & Wakefield has recently just released the quarterly update for the latest quarter of 2017. This quarterly report provides some useful insight regarding the office markets in the cities of Sydney, Melbourne, Canberra and Brisbane, useful for those looking into office fitouts in Canberra or any of the other cities.
During the second quarter of the year (Q2), Melbourne recorded above average numbers in terms of rental growth, whilst Sydney continued on a trend of modest growth this quarter. Lack of available CBD stock in the capital city of Canberra led rent uplift, whilst Brisbane’s recovery is slowly but surely proceeding and gaining ground.
The report’s highlights, which sum up the report’s data, are as follows:
- CBD Markets are to expect below average numbers in terms of new supplies;
- Melbourne’s future office supply pipeline is improving, clearing up with pre-commitments and progress in construction projects;
- Melbourne and Sydney’s tight vacancy conditions means that the rent market will remain ‘landlord favourable’;
- Limited stock availability is slowly moving Canberra towards ‘landlord favourable’ conditions;
- Tenants in Brisbane are now responding to forthcoming lease expiries earlier.
NSW retains good economic growth, remaining positive despite some slowdown.
- State final demand growth dropped to 0%
- Unemployment rate declined to 5.0%, but employment growth is also experiencing slowdown.
- Multiple infrastructure projects should be able to support NSW.
In terms of the lease market, smaller leases took charge of activity during Q2 2017.
- Single-floor and part-floor leases comprise a lot of Q2 activity
- Limited transactions over 4,000m2.
- B-grade market remaining strong with competition for limited stock.
Melbourne is experiencing strong activity from the pre-commitment sector
- Some of 10,000+ m2 office space remain active, which will lead to strong leasing demand during Q3.
- Activity in H1 2017 was ended with NAB’s pre-commitment of 66,000 m2 at 405 Bourke Street.
In terms of rental activity, conditions in Victoria and Melbourne are creating a ‘landlord favourable’ market.
- Prime net incentives down to 31%, which led to a quarterly rise in rent of 1.8%. Prime net effective rents now sit at $371.
- B-grade net effective rents now sit at $265, after a 1.4% quarterly growth.
The state’s final demand growth sits comfortably above average, leading to better service sector demand for office space. Demand from new and existing tenants is expected to further lower vacancy rate.
Queensland’s state final demand remained still in Q1, but was still positive at 1.1%
- Cyclone Debbie lead to weakened coal and sugar exports, offsetting the increase in prices.
- Office leasing market continues recovery, with tenants still holding on to the upper hand in negotiations.
- Rent is going up, with the average prime gross effective rent sitting at $446/m2, thanks to an annual growth rate of 1.9%.
ACT (Australian Capital Territory)
For those looking for office fitouts in Canberra, the news is good, as Canberra’s office market remains strong.
- Economic growth rate sits at 6.5%, the country’s highest.
- Prime gross effective rents grew to $350/m2 due to yearly rental growth of 5.2%.
- Strong fundamentals in the market has allowed landlords to reduce incentives to 20%.