MELBOURNE’S Docklands and Southbank office markets will continue to be the star performers, according to Savills Australia’s Tony Crabb who is speaking at the API/REIV breakfast this morning.
In his State of the Market address, Crabb said Melbourne’s office market was the best in the country underpinned by diversification and solid market fundamentals driving a consistently strong performance as comparable markets struggled.
“By contrast the Perth, Brisbane and to a lesser extent Adelaide markets which are heavily dependent on the success of the resources sector and the Sydney market’s dependence on the financial sector render them much more vulnerable to economic boom and bust cycles.
“Melbourne’s lack of tenancy specialisation is, perhaps paradoxically, its trump card,” Crabb said.
He said while vacancy had risen to 7.1% (combined CBD and Fringe markets) it could be explained by supply additions rather than a fall in demand.
“Demand has not fallen as much as we might have expected as a result of the GFC. While the increase in vacancy in 2009 was around 525,000 sqm, the bulk of it – 430,000 sqm – was supply addition and so a net increase in vacancy of just 95,000 sqm or a barely noticeable 0.61% of the 5.5 million sqm market total.
“This is just normal market churn. Business has been quite good and that’s why rents have remained relatively stable and why investment has been so good,” he added.
Crabb said the fundamentals are now firmly in place for new development, with increasing demand, declining vacancy and insufficient new space planned or under construction, and the bulk of that will occur in that increasingly important fringe market.
“By the end of 2013 we are looking at a 2.6% (check) vacancy rate at current stock levels so there’s no doubt we will be needing new stock. As the economy gathers a head of steam over the next two years part time employees will become full time and employment numbers generally will pick up,” he added.
However, Crabb said funding is the key.
“Banks have not been providing the finance and companies have been unwilling to spend the money on expensive fit-outs, however the economy is now showing all the signs of having turned the corner, business confidence is up and we are now beginning to see banks and companies return to the game,” he concluded.
Australian Property Journal
