Investing in office property requires knowledge of the local market

Not that long ago, the office market as a whole was progressing well, right around Australia.

However, following the GFC, each local suburban market has been recovering at a different pace.

Perth rebounded rather dramatically, once the mining sector started to pick up again. And yet it has suddenly plateaued while mining currently takes a breather.

According to recent research by Colliers International, Sydney's suburban office market seems reasonably balanced – with its vacancy levels ranging from 5.1% in Homebush to 8.7% in Parramatta – with the exception of St Leonards/Crows Nest (at 10.7%), and Norwest (at 15.1%).

But with continued tenant demand and a lack of supply, you should see vacancies decline sharply in 2013.

On the other hand, Melbourne seems to be currently enjoying a tighter range, from 4.9% in the south-east to 7.9% in the outer east. And even though some 32,000 square metres of space is under construction, about 70% of this is already spoken for.

At the moment, Brisbane is showing a vacancy range from 6.4% in the inner south to 11.1% in Spring Hill. Overall, the Brisbane suburban market sits at around an 8.5% vacancy rate, which is up from its "unbalanced" level of 2% in January 2008.

The Adelaide market is much smaller than other capital cities and can often slip under the radar.

Rentals here have been increasing through strong tenant demand, and a current lack of new space coming on stream. As such, vacancy levels are likely to fall below 5% during 2013.

Markets within markets

While this brief analysis provides you with a quick "helicopter view" of the suburban office markets in the various capital cities, you really need to focus more on the specific suburban regions within each city.

This will mean going back in time as well as studying the projections looking forward.

By way of example: Let's dig a little deeper within the Melbourne market — where from this graph, you can observe the movement in vacancy levels over the past year or so.

Clearly, the south-east region has been consistently outperforming the others. And this is expected to remain the case for the foreseeable future – which would tend to make this particular region your preferred choice.

Bottom line: You can't simply rely upon the general health of a particular capital city market as the sole basis for making your decision.

It is important to peel back the layers and delve below the surface to reveal the underlying trends and ensure you have some real substance to justify your intended purchase.

And having that local knowledge will go a long way.

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.