While several capital cities still have a reasonably high Office vacancies, there is a general shortage of space looming.
Twelve months ago, it was all doom and gloom for the CBD Office markets in Perth and Brisbane — with falls expected in both rents and values. New projects were being finished, as the resources boom ground to a halt.
In Sydney … investment banks, lawyers and accountants were reducing staff in anticipation of a severe downturn in the finance sector.
h3. Perth & Brisbane
Late in 2008, mining companies in Perth rushed to sublease large chunks of space — anticipating a long and severe downturn. But during last year, mining companies took up over 40% of all the space leased — despite only occupying about 20% of the overall Perth market.
At the moment, Perth has a 7.7% CBD vacancy rate. Early last year, predictions were that the Perth vacancy rate would reach over 16%. But with the impact of the Gorgon project, the current view is that it is more likely to peak at around 10%.
By contrast, Brisbane heading towards a 10% vacancy rate, with 10 new office projects are just coming to completion this year. However, with the onset of the LNG boom, Brisbane’s vacancy rate should peek at around 11.5%, instead of the 14% expected a year ago.
h3. The Sydney Market
The financial services sector has always dominated Sydney’s CBD Office market.
Therefore, as business opportunities dried up early in 2009, these firms laid off staff and sublet space, to quickly reduce their overheads.
And there is even talk that the in new 1 Bligh Street office tower may achieve rentals of over $1000 per square metre on completion.
h3. Melbourne & Adelaide
Unlike Perth, Brisbane and Sydney … Melbourne’s Office market is far more diversified — and not dependent upon just one sector.
As such, rentals have held up and leasing activity remained fairly strong — with Jones Lang LaSalle reporting a 20% increase in enquiries for the 12 months to September last year.
Melbourne currently has a vacancy rates of 6.4% for CBD offices — with virtually all new construction being driven by large pre-commitments. And while its premium rentals may only be around $550 per square metre, they are expected to increase by around 10% to 15% over the next couple of years.
Adelaide has likewise fared well, with Office supply likely to be extremely tight over the next 2 to 3 years.