THE Australian office market has let off some steam after running hot for several years. The Property Council said whilst the market remains strong, the sector should be mindful of the risks of oversupply.
According to the Property Council’s latest Office Market Report, the national vacancy has risen to 4.2% in the six months to July 2008 – for the first time since January 2004, from 3.9% in January 2008.
However, Property Council chief executive Peter Verwer said the office market is still strong and a wind-back in demand has been anticipated for some time after the sector has been running very hot for several years.
In the six months to July, 199,559 sqm of space was absorbed and 681,285 sqm over the 12 months to July.
He added that net absorption for the six months is in line with the 15-year average of 205,020 sqm.
Once again CBD office markets performed comparatively better than the non-CBD markets, with a vacancy rate of 3.4% up slightly from the 3.0% in January 2008. On the other hand, non-CBD vacancies rose from 5.9% to 6.1%.
With the exception of
But based on net absorption, the best-performing markets were the Melbourne CBD (59,967 sqm), Brisbane Near City (49,422 sqm), Brisbane CBD (33,071 sqm) and the
Meanwhile Verwer said supply has also eased in line with demand. During the period, 393,488 sqm of space was added down from 597,109 sqm introduced in the half-year to January.
But Verwer warned that developers should be mindful of the risk of over-supply.
According to the OMR, in the latter half of 2008 more than 670,000 sqm of office space is due to be added to Australian markets, which is more than double the 15-year average.
“Stock withdrawals have played only a minor part in the market in the past 12 months.
“It has simply not been effective for building owners to withdraw stock while demand has been extremely strong and vacancies have been at record lows,” he added.
Verwer said buoyant market conditions in the past two years have also prompted the commencement of new office buildings, many of which will be delivered over the next three years.
The OMR shows that in 2009, just over 1 million sqm is come online across all 11 office markets followed by 1,309,742 sqm in 2010.
The CBD markets will add 326,983 sqm in 2H of 2008 followed by 806,962 sqm in 2009 and 1.05 million sqm in 2010+. Meanwhile the non-CBD markets add 343,218 sqm in 2H 2008, another 249,264 in 2009 and 255,501 sqm in 2010.
Australian Property Journal
