Over the last few years, the commercial property market in Australia has experienced solid returns. Despite this growth and low vacancy rates the Australia commercial property market remains vulnerable to global financial market turbulence and economic downturn. The following is an overview of the Australia commercial property market:

According to the 2009 Colliers Report, in the office market, leasing activity in Brisbane’s CBD remained relatively resilient during the first half of 2009. In particular, there was strong demand from the energy and government sectors for brand new quality office accommodation. For example during the fourth quarter of 2009, the projection of vacancy rates in Sydney has been revised downward as a result of the continued pick-up in the local economy and stronger-than-expected leasing demand for offices. However, with rising lease incentives, office rental growth was stagnant across the board. On a positive note, private investors and owner occupiers remained active to secure quality stock prices at AU$20 million or below.

While demand for office space is expected to remain positive in the short term, the levels are unlikely to be high enough to fill the office space completed in the last round of projects and the backfill space created in existing premises by relocating tenants. A rise in total vacancy rates are thus expected which is likely to peak of about 10% during 2010, following ANZ’s relocation to the Docklands and its subsequent vacation of several prominent buildings in the traditional CBD grid. As vacancy increases, downward pressure on rents is expected (Marketview CB Richard Ellis Report).

Melbourne’s CBD Office is experiencing stable rents and relatively tight yields compared to other Australian capital cities. Incentives have now crept back into the market (Marketview CB Richard Ellis Report).

Since June 2009 Sydney CBD Office has experienced a peak of prime office spaces since 1994. Rentals have declined by 2.5% and yields for prime properties have softened further over the last quarter of 2009 (Marketview CB Richard Ellis Report).

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Brisbane’s CBD Office rents on the other hand have fallen by approximately 10-15% over the past 12 months. This is combined with rising incentives, averaging between 16.3%, which means that net effective rents have decreased over the year (Marketview CB Richard Ellis Report).

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Adelaide’s commercial property market is in reasonable balance and is expected to remain stable through the cycle. Adelaide’s moderate rise in property prices and rentals despite declines in other cities and its solid fundamentals suggest stability and a positive outlook for years to come (Marketview CB Richard Ellis Report).

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According to Colliers International’s biannual Global Office Real Estate Review Midyear 2008, Perth still holds the title of the tightest CBD office market in the world, with Brisbane dropping from number 2 to number 6, the report showed Perth had recorded the lowest vacancy in the world, at 0.3%, for the third time running in the biannual Colliers International report which covers 172 office markets across the globe.

For further information on the Australia commercial property market, call us in Sydney at +61 280 147 568 or contact us at email@healyconsultants.com

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