Queensland seems to have been hardest hit. And in particular the Gold Coast, where vacancy levels have soared to around 18%.
But the difficulties confronting Queensland (and fellow mining State WA) are not necessarily reflected Australia-wide.
Compared with the 20%+ vacancy rates of the early 1990s, and what’s happening in the US and UK … the Australian office markets are in pretty good shape.
You will see vacancies continue to rise, which will affect rental levels and leasing incentives.
In fact, tenant demand in Brisbane, Perth and Canberra for CBD Office space has fallen to well below the 15-year average … according to the Property Council of Australia.
As a result of the global turmoil the amount of Office space available for sub-lease increased by 50% during 2008.
h2. Around the Country …
With staff being shed in Sydney by Macquarie, Babcock & Brown and Australian Insurance Group … this accounts for nearly half the nation’s sub-lease space within the CBDs.
So far, Brisbane seems to have suffered most following a fall-off in demand within the resources sector — with rents expected to fall by nearly 20%; and vacancies rise to about 10% by the end of 2009.
As such, Sydney’s vacancy rate is forecast to reach 6.5% by the end of 2009.
In Canberra, you’ve seen the vacancy rate hit 8.5% as 86,400 square metres of new space came onto the market in the past six months — more than twice the 15-year average.
In contrast, Melbourne has absorbed three times more space (nearly 116,000 square metres) than the next best performer, Adelaide. And Melbourne may well face a shortage of supply by 2010, as most of the space in the pipeline is pre-committed.
That means you could start to see some upwards pressure on rentals.
The Adelaide office market has been somewhat protected from the resource and financial sectors — and has actually reduced its vacancy rate, over the past 12 months.
Accordingly, this resulted in a 20% jump in its prime gross effective rentals during 2008 to where the average rate now sits at around $325 per square metre.
While the vacancy rate for Perth is still relatively low, you have about 300,000 square metres of new space about to hit the market.
As such, Perth’s vacancy rate will probably rise to 5% by the end of 2009. And it could even approach 10% during 2010, given the amount of space planned or already under construction.
Therefore, the Melbourne and Adelaide Office markets are appear where you should be focusing your investment activity at the moment.
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