It’s time for commercial property investors to focus on Melbourne and Sydney office markets

It has taken almost four years, but in 2012 prime office markets in Perth, Melbourne and Adelaide should expunge the capital value lost through the GFC, according to CBRE research.

In turn, this will impact upon their suburban office markets as well.

But it might take until 2016 before Sydney, Brisbane and Canberra are able to recoup that same lost ground.

And the reasons for that?

The Perth market has enjoyed a very strong bounce from the resources sector, with very little new construction over the past three or four years.

Melbourne entered the post-GFC downturn with probably the best local economy. And it did not have the same concentration of finance sector tenants that Sydney did. Therefore it experienced the shallowest dip in capital value.

Throughout the downturn, Adelaide seemed rather protected from any GFC fallout — keeping a stable balance between demand and supply.

Unfortunately, the Sydney market had the greatest exposure to the finance sector — which has kept its vacancy rate disturbingly high, despite only modest new construction levels.

Canberra already had a significantly high vacancy rate when the GFC hit. And the government cutbacks will certainly not help to improve that situation.

While Brisbane also has its own mining sector, it has not created sufficient demand to reduce the high vacancy rate following the GFC downturn. And clearly the devastating and continued flooding has adversely affected the local economy as well.

Bottom line: Fortunately, there has been only a modest amount of new construction in the past four years. And this will help to keep vacancy rates across Australia hovering around the long-term averages, for most capital cities.

As a commercial property investor, you should be viewing the Perth recovery as too rapid. And the Brisbane recovery is too slow. It's not wise to invest into volatility, or stagnation.

Both the Adelaide and Canberra markets are relatively small and affected more by local issues.

Therefore, with some guidance, you should be focusing upon the Melbourne and Sydney markets going forward.

Chris Lang is an advisor to commercial property investors and gives keynote speeches and regular seminars on the best way to invest in commercial property. He maintains a blog, his-best.biz, which he updates regularly about the best way to get the most out of your commercial property investment.