LAST WEEK, the Property Council of Australia released its Office Space survey, for the 6 months to January 2012. And this will have some interesting implications for the Commercial property market.
As you can see, total vacancies fell from 9.0% to 7.9% — the lowest since January 2009. And perhaps a quick summary of the CBD Office markets would be worthwhile.
The vacancy rate for Sydney only fell marginally from 9.6% to 9.3%, due to its large financial sector being effected by the GFC. Unfortunately, net absorption over the 6-month period was a mere 8122 sq metres, which was well down on the 31,063 sq metre historical average.
Whereas, Melbourne was able to boast the lowest office vacancy rate after Perth — falling from 5.8% to 5.3%. As a result, there is a looming shortage of contiguous floors to accommodate any major tenancy needs. And that means several large pre-commitments could well encourage some new project starts during the year.
The Office vacancy rate for Perth stands at a 3-year low … having plunged from 7.8% to 3.6% over the six-month period, due to the resources boom. This is likely to tighten even further, with few new projects due to come on-stream over the next few years.
Again, the resources sector saw the Brisbane vacancy rate also drop from 7.4% to 6.2% over the same period. This tightening is likely to continue, but not to the same extent as for Perth — due to the problems faced in accessing some of the mines, following the Queensland floods.
The Adelaide Office market has been flat-lining, with only a 0.1% drop in vacancies to 7.7%. And its vacancy level is likely to increase over the next few years, due to several new projects currently underway.
Bottom Line: Apart from the Gold Coast, most Office markets around Australia are in good shape.
The fundamentals are strong for Melbourne, Perth, and Brisbane — with the current upward trend expected to continue over the next five years.
This is shaping up as a rather tough period for tenants. But in turn, that will mean some good times for Commercial property investors — both large and small.