The mid-year report from the Property Council of Australia (PCA) has confirmed a tightening of all major Office markets — except for Sydney and the Gold Coast.

As you can see from the graph, Sydney’s vacancy rate actually increased from 8.3% to 9.3% during the six months to July 2011.

For the remainder of Australia’s office markets, there was an overall improvement — as demand for space exceeded supply, and yields began to firm.

According to Peter Verwer (PCA’s chief executive): “This is a good result, especially now with a lot of uncertainty about Australia’s economic resilience … demand and absorption are well above the historical average, except for the orphan Sydney.”

From this second graph, you will also notice that the Melbourne Office market has been consistently outgrowing Sydney, since about July 2004.

Furthermore, because of Sydney’s heavy dependence upon the financial sector … this growth trend is unlikely to change any time soon.

Melbourne, on the other hand, has its Office demand spread across a wide number of sectors. And therefore, has been far less exposed to the recent global turmoil.

Bottom Line: Despite all the stock market gloom, the underlying fundamentals for Commercial property are strong — particularly in Melbourne.

And historically, it is in times like these when shrewd investors have laid the foundation for their extraordinary fortunes in Commercial property.