Sydney office rents poised for rapid growth: CBRE

??Sydney office landlords look well placed for an increase in rental returns over the coming months, with the city entering an accelerating rental growth phase, according to a third-quarter global office market outlook report from CBRE.

Sydney’s strong growth prospects are in contrast to other major Asia Pacific prime office locations such as Hong Kong, Singapore and Shanghai, where rental growth is slowing.

Rental growth is also expected to slow down in the London and New York, according to CBRE.

The report also notes that leasing deals in Melbourne (alongside Taipei, Kuala Lumpur and India) were modest relative to their market size in the third quarter of 2011.

Sydney’s strong position is in contrast to only modest improvement in global office market sentiment, with the CBRE Global Office Rent Index gaining just 0.9% in the third quarter of 2011 due to occupiers remaining “more cautious about space commitments”.

The 0.9% gain is the lowest recorded since the first quarter of recovery – the second quarter of 2010 – and 32 basis points below the 1.2% average quarterly gain recorded since the market’s trough.

The index was boosted by the Asia Pacific region, which recorded a 12.9% year-on-year increase in the third quarter.

However, for the third quarter, rents increased by a modest 2.2%, indicating that rent increases have slowed in the region.

Despite the global rental growth slowdown in the third quarter, 15 of the CBRE Global Office Rent Cycle’s 18 prime markets passed their respective troughs (including Sydney), while three markets experienced rental declines.

The three markets to experience rent declines were Tokyo, Los and Angeles and Madrid, the same three markets that experienced rent declines in the second quarter of 2011.

According to CBRE, global construction completions have abated in 2010 and 2011, helping to drive office demand and slowly absorb some of the vacant space in the market.

However, net absorption remains well below pre-recession levels, both globally and in the major regions. Asia is the exception, where office demand and absorption have been stronger than their pre-recession levels.

The report notes that while economic growth has moderated in the Asia Pacific, the employment rate, consumer confidence and economic remained strong in the third quarter.


Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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