Sydney, Melbourne office markets moderating: Cushman & Wakefield
The office markets in Sydney and Melbourne are moderating after their strong run in 2016 while Brisbane and Canberra are picking up, according to the latest research by Cushman & Wakefield.
The property agency’s national head of Office Leasing, Tim Molchanoff said: “During Q3, we saw a mild convergence across east coast office markets, as Sydney and Melbourne Growth moderated from strong gains in 2016, while Canberra and Brisbane are picking up pace. A different picture is starting to emerge compared to 6 months ago.”
In Sydney, big deals were a key driver this quarter as major tenants moved to take up space in the CBD. In Melbourne, the big landlords competed for pre-commitments as major office developments continued at pace, he added.
“For Brisbane, the recovery continues with vacancies modestly tightening in the prime market with tenant favourable conditions driving office upgrades,” said Molchanoff.
Canberra saw the completion of Cromwell’s 30,000 sq m A-grade Tuggeranong development.”
Following are the highlights from the 3rd quarter report.
Sydney – big lease deals return in Q3/ Prime rent growth bounces back
- Vacancy declined, with the Premium rate compressing 300 basis points to 9.5%, while A grade at lowest rate (3.6%) since mid 2008.
- Prime gross effective rents at $916 per sqm - up 1.6% QoQ and 6.9% YoY
- Major deals: Clayton Utz renewed 17,000sq m (premium) at 1 Bligh St. Jobs for NSW signed on to 17,000 sq m (B-grade) at 11-31 York St
Melbourne - prime vacancy tightens, rents increase/developers vye for large tenants
- Prime net effective rents at $376 p/sq m p.a - up 1.2% QoQ and 6.9% YoY.
- In Q3, prime outgoings rose 7% QoQ, B grade outgoings up 10% as landlords passed on higher land tax expenses
- Landlords jostled to secure large requirements with developers like Lendlease and Mirvac behind 12 CBD office towers under construction or approved
- Major deals include: Recoveriescorp taking 3,562 sq m and Latitude Financial taking 9,744 sqm at 800 Collins
Brisbane – prime market leading the recovery
- Prime gross effective rents have remained steady at 1.1% growth y-o-y
- Annual net absorption saw prime vacancies decline from 15.5% to 11.7%.
- Major deals: Deloitte renewing 6,000 sqm (premium) at 123 Eagle St, DSITI taking 3,000 sqm (A-grade) at 140 Creek St and QLD Electoral commission taking 1,822 (premium).
Canberra - New development completed in Tuggeranong
- $352 prime gross effective rent (per sqm)
- 5.2% State Final Demand growth (annual avg) led all services sector states
- Major deals: Cromwell’s 30,000 sq m A-grade development completed and will be occupied by the Department of Social Services from late Sept 2017