Australian CBD office markets outpace their Asian neighbours: CBRE
Prime office rents have continued their upward trajectory across Australia’s biggest CBD markets, bucking the slowdown occurring across the wider Asia Pacific region, according to analysis by CBRE.
CBRE regional director for office services James Patterson says the lack of large and well-located premium floor space is continuing to support rents in Sydney and Melbourne while demand for resources companies is supporting growth in Perth and Brisbane.
In Sydney, the core CBD market was the only precinct to achieve rental growth in the third quarter, with the largest deal over this period the re-signing and expansion of Deloitte’s commitment to lease 28,000 square metres of space at Grosvenor Place at 225 George Street.
The bulk of the remaining activity involved smaller deals.
Rental growth was stagnant in Melbourne over the quarter as occupiers delayed decisions due to the global economic volatility. However, minimal supply in the CBD is expected to drive continued growth in rents in 2012 as only 6% of the new stock due to be completed in 2012 is not pre-committed.
Brisbane’s CBD office market continues to be driven by demand from companies directly or indirectly linked to the resources sector, with strong positive net absorption in the Brisbane CBD recorded over the third quarter.
CBRE expects occupier demand to drive continued prime rental growth in the CBD despite new stock completions in 2012.
“Vacancy in the Pacific declined more rapidly during the third quarter than had been expected,” Patterson says.
“Vacancy in prime buildings is exceptionally low across all markets and this trend is likely to persist over the remainder of 2011 given that the new supply due to come on stream has mostly been pre-let.”
The strong performance of Australian and the Pacific region is in contrast to the wider Asia Pacific region, where office rental growth has slowed in most markets due to the uncertain global economic outlook.
The CBRE Asia Pacific Office Rent Index increased by 2.2% quarter-on-quarter in the third quarter of 2011, but this was the lowest rate of growth recorded in 12 months.
In addition to Australia, China was one of the few office markets to generate strong expansionary demand, with Beijing and Guangzhou enjoying quarter-on-quarter rental growth of 8.8% and 7.8% respectively.
In the Pacific region, rental growth slowed to 0.8% over the September quarter from 4.2% year-on-year.
Region-wide, CBRE head of research for Asia Pacific Nick Axford says the short-term outlook for the office sector remains positive, despite the instability in regional stock markets and the worsening economic situation in the United States and Eurozone.
“Rental growth is likely to continue to moderate slightly in the months ahead as the external economic volatility will continue to weigh on business sentiment in the region going forward,” he says.
“Occupier demand should remain firm in greater China markets on the back of robust demand particularly from domestic companies. However, externally oriented markets such as Hong Kong and Singapore will be particularly vulnerable to further disorder in the global economy.”