Buying Offices Requires You To Understand The Local Markets

Suburnban Offices are in DemandNOT THAT long ago, the Office market as a whole was progressing well … right around Australia.

However, following the GFC, each local suburban market has been recovering at a different pace.

Perth rebounded rather dramatically, once the mining sector started to pick up again. And yet it has suddenly plateaued, while mining currently takes a breather.

According to recent research by Colliers International, Sydney‘s suburban Office market seems reasonably balanced — with its vacancy levels ranging from 5.1% in Homebush, to 8.7% in Parramatta — with the exception of St Leonards/Crows Nest (at 10.7%), and Norwest (at 15.1%).

But with continued tenant demand and a lack of supply, you should see vacancies decline sharply in 2013.

On the other hand, Melbourne seems to be currently enjoying a tighter range … from 4.9% in the South East, to 7.9% in the Outer East. And even though some 32,000 sqm og space is under construction, about 70% of this is already spoken for.

At the moment, Brisbane is showing a vacancy range from 6.4% in the Inner South, to 11.1% in Spring Hill. Overall, the Brisbane suburban market sits at around an 8.5% vacancy rate, which is up from it’s “unbalanced” level of 2% in January 2008.

The Adelaide market is much smaller than other capital cities; and can often “slip under the radar”.

Rentals here have been increasing through strong tenant demand, and a current lack of new space coming on stream. As such, vacancy levels are likely to fall below 5% during 2013.

Markets within Markets

While this brief analysis provides you with a quick “helicopter view” of the suburban Office markets in the various capital cities … you really need to focus more on the specific suburban regions, within each city.

This will mean going back in time, as well as studying the projections looking forward.

Delve below the surface within each Regional MarketBy way of example: Let’s dig a little deeper within the Melbourne market — where from this graph, you can observe the movement in vacancy levels, over the past year or so.

Clearly, the South East region has been consistently out-performing the others. And this is expected to remain the case, for the foreseeable future — which would tend to make this particular region your preferred choice.

Bottom Line: You can’t simply rely upon the general health of a particular capital-city market, the sole basis for making your decision.

It is important to peel back the layers and delve below the surface … to reveal the underlying trends, and ensure you have some real substance to justify your intended purchase.

And having that local knowledge will go a long way.

 

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