Melbourne has most affordable metro office market: Chart of the week

Melbourne has the most affordable metropolitan office leasing market relative to the cost of leasing in the corresponding CBD market, according to Colliers International.

The metropolitan office market includes St Kilda Road, Southbank, the city fringe and inner east (places like Richmond), south east (Hawthorn and Dandenong) and outer east (Notting Hill), north and west (Essendon and Footscray).

The Colliers Metro/CBD Office Affordability Index compares the average A-Grade net effective rents of each city’s metropolitan office markets, to that of their CBD counterpart.

An index score of 1.00 represents parity (i.e. the rent in metro markets is the same as in the CBD) while a lower index scores means cheaper metro rents relative to their CBD, making them more attractive to cost conscious tenants.

As the chart shows Sydney (0.85), Melbourne (0.73) and Brisbane (0.85) metropolitan office markets, as a whole, remain below the 1.00 parity level.

However, all three have seen their index number steadily increase over the past 12 months. This has been due to the combination of softening effective rents in each of those CBD markets, in contrast to low incentive levels and rental growth in each of the metro markets.

The Adelaide Fringe (0.94) index has been more expensive than its CBD as it consists of boutique office space, which has traditionally been more tightly held and until recently had little to no incentive level.