Metro office markets continue strong growth: Colliers

Katherine JimenezDecember 7, 2020

The strong march of Australia's metropolitan markets has continued, particularly in Sydney and Brisbane which have experience solid supply growth, tenant demand and investor interest.

New research prepared by Colliers International, examining the CBD and metropolitan office markets, found that while Australia’s CBD's still contain the majority of the country’s office space, the metropolitan markets represent "a large and growing proportion".

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Cities monitored as part of the "Metropolitan Office Research & Forecast Report"  – Sydney, Melbourne, Brisbane and Adelaide – had  a combined total of almost 10.5 million square metres of office space in their metropolitan markets. In contrast, those four capital city CBDs had 12.8 million square metres of office space.

The Colliers report showed that the Sydney and Brisbane metro markets have seen significant growth in net lettable area (NLA) over the past 10 years, growing by 79% and 62% respectively. Sydney's metro market is now bigger than the CBD market.

The metro markets of Melbourne and Adelaide have seen respective NLA growth of 24% and 14%, and have been outperformed by their CBD markets.

Going forward, Colliers expects urban regeneration precincts and those with solid public transport access will continue to offer best prospects for growth.

Parramatta and North Sydney in NSW and the Northshore Hamilton precinct in Queensland were identified as areas to watch.

Melbourne's  Fishermans Bend precinct - a 240 hectare precinct on the edge of the CBD that had  recently been rezoned to capital city use, was another hub potentially with good prospects.

Whilst planning for the precinct was in its very early stages, it said, the Victorian State Government had  plans for up to 40,000 jobs in the area.

"Even if only half of these jobs are office-based, as many are expected to be retail, this equates to around 280,000sq m of office development in the area – that’s more than three Rialto towers, " Colliers said.

Another key finding of the report was the increasing number of local institutions are shifting their investment focus away from traditional CBD office markets to metro markets.

Colliers managing director of capital markets and investment services,  John Marasco noted that while the focus of the major domestic and offshore pension and sovereign wealth funds continued to be on CBDs, "other listed and unlisted institutions will create funds specifically to target metropolitan office markets, as their capital looks for new and expanded markets".

“A number of major Australian institutions are believed to be creating these kind of funds as they seek to diversify their portfolios and target higher yielding assets.”

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