Commercial Property Looking Forward

Is there a Future for Offices?

The last couple of articles have talked about all the misplaced doom and the gloom.

Plus, you also covered the various reasons why Australia overall is well placed to flourish (and not just survive) the current global distress.

A recent report on the Australian Office scene (by Morgan Stanley property research) would only tend to confirm that view. Their only concern would be the Sydney market, due to its heavy exposure to the financial sector.

Handy Stat: For any Office market to be “in balance”, it needs to have between a 5% and 6% vacancy rate.

You see, there needs to be some level of vacancy, so that companies are able to relocate with relative ease.

However, when the vacancy rate falls below this ideal range … it tends to place undue pressure upon rentals — to where it then becomes a landlord’s market.

And when the vacancy rate is consistently above 7%, it then starts to become a tenant’s market.

Bottom Line: If you take a look at Morgan Stanley’s projected vacancy rates … you’ll see that it is really only Melbourne and Perth that will enjoy some strong rental growth over the next 4 to 5 years.

Whereas, the remaining capital cities (especially Canberra) are likely to see a slower entry into the current upswing … already underway.


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