SIX months is a long time in property and the days of big leasing incentives for prime CBD office space are slowly disappearing, according to Australian Property Institute’s Property Directions Survey.
API’s Australian Property Directions Survey of 33 major property companies, conducted by the NSW division, has found that sentiment amongst respondents has improved significantly in the space of six months.
The April 2010 survey revealed that fewer respondents see 30% or greater incentive levels as a feature for prime and A Grade CBD space. Estimates were made as an annual percentage over a 5 year lease term, so 10% equals a 6 month rent free period or equivalent value of incentives.
Owners in the Melbourne CBD prime and A Grade reported 0% of 30% incentive levels in the six months to April 2010, unchanged from September 2009. Prime Brisbane CBD reported just 4% compared to 30% in September and A Grade reported 11% compared to 39% previously. Prime Perth CBD reported 0% compared to 32% previously and A Grade reported 17% (36%). Prime Adelaide CBD remained at 0% whilst A Grade dropped from 13% to 6%.
On the other hand, prime Sydney CBD reported a slight increase to 10% compared to 9% previously, however 30% incentive levels for A Grade fell from 44% to 20%.
API NSW president Robert Hecek said since September, respondents have seen a reduction in leasing incentives across all cities.
“The decreasing incentives show a strengthening of the commercial property market.
“The reduction in incentives reflects the property clocks that show the commercial market in Sydney and Melbourne already on the upswing, with Brisbane having bottomed out,” he added.
Meanwhile leasing incentives have not disappeared as higher number of respondents reported an increase of incentives in the 20-29% range for prime and A Grade properties in Sydney, Melbourne, Brisbane and Perth.
Despite the increase in that incentive level, respondents’ expectations of effective rents have shifted slightly from declining to increasing.
Over the next six months 22% of respondents believe rents will fall, whilst 52% think it will be stable and 26% predict an increase.
However over the 12 months period, just 10% forecast a fall and 22% say rents will remain stable whilst a whopping 68% predicted an increase.
Australian Property Journal
