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OFFICE VACANCY RATES have lept towards 15% in Brisbane, Darwin, Canberra, Adelaide and Perth. And this takes the national average to 12.4%, as an overall vacancy level.
However, businesses are now leasing space once again in both Sydney and Melbourne — where their vacancy rates are currently hovering around 10%, according to Jones Lang LaSalle.
Tenant demand for space under 800 sq metres has been strong — with technology firms, investment banks and business services expanding. And compared with other capital cities, Melbourne enjoys demand from a far wider profile of tenants.
By 2016, the Property Council of Australia is predicting a vacancy rate of under 9% for Sydney and Melbourne. Whereas, the other capital cities are expected to still be up around 16%. (CBD Office markets are considered “in balance”, with a vacancy rate of between 6% to 8%.)
Offshore Buyer Demand
Overseas investors have been responsible for boosting sales of Commercial property to nearly $11 billion, during the September quarter. Their contribution was about $4.4 billion; and accounted for half the number of actual sales.
Interestingly, Singaporean investors (at $2.8 billion) have clearly outperformed Chinese investors (at $518 million).
While many of the purchases were made within the various CBDs … there will be an obvious flow-on effect to the inner-city suburbs, around most Australian capital cities.
Furthermore, there were a significant number of purchases made of lower-grade office buildings — which are planned for either development (or conversion) into apartments.
Two-fold Effect
These projects will obviously help in reducing the overall vacancy rate around the country, by effectively withdrawing whole buildings from the market.
However they will also create added concern for those fearing an unhealthy oversupply of inner-city residential accommodation, within our capital cities.
Bottom Line: Overseas investors are clearly seeing numerous opportunities here in Australia. And their increased activity over the past year has certainly taken many local investors by surprise.
Provided you base your purchases upon underlying fundamentals, the next 4 to 5 years is looking rather rosy for Commercial investors.
