The latest office market statistics were released by the PCA last week and the results were generally in line with our expectations of the overall CBD performance across Australia.
Surprisingly, Perth CBD achieved an improvement in vacancy within the last 6 months. David Barnes, director of LPC Cresa Perth, provided an insight into the reality of the shift in vacancy and current market conditions.
“Following the sharp decline in commodity prices – particularly oil and iron ore, together with the completion of a number of development projects in the resources sector over the last 24 months, the Perth CBD office market demand will remain subdued for the short to medium term. Statistics have shown a recent positive net absorption, primarily through an influx of smaller tenants from CBD fringe and suburban areas. This has been possible following the sharp reduction in effective rents as landlords offer substantial leasing incentives.”
David anticipates this trend to continue although with a likely increase in the vacancy rate following completion of development currently underway.
Sydney CBD’s vacancy rate continued its recent trajectory and decreased to 5.9 percent, maintaining its position as the CBD with the lowest vacancy. Whilst the statistics represent a tight market we are anticipating a rise in sublease offering. Ken Lam, director of LPC Cresa Sydney, said “we are aware of a number of sublease offerings that are yet to hit the market and expect these offerings to come on line over the next 6 months. A factor of the anticipated rise in sublease offering appears to be as a result of businesses not meeting their growth projections. As a result of this it is likely to shift tenant’s focus away from direct space as these opportunities provide tenants with existing fitouts and flexibility on the term.
Melbourne CBD’s overall vacancy remained steady at 6.5 percent with strong tenant demand whilst Brisbane CBD suffered a slight increase from 15.3 to 15.7 percent following the continuation of reduction in demand.