Leasing activity – The Melbourne market performed stronger than expected over the Spring quarter, recording a decline in office availability – attributed to a resilient economy and less reliance than Sydney on the volatile Finance and Insurance sector. Sydney also showed tentative signs of recovery whilst Perth and Brisbane continue to perform far below boom 2006 and 2007 levels. Subleasing is a good indicator of office market performance and has now recorded a drop in activity, quarter on quarter. This indicates company office space consolidation phase of 2008 and 2009 has peaked.
Sales - Large institutions have remained mostly inactive whilst minimal sales have been dominated by private buyers, taking advantage of a buyers’ market. Although assets have been written down over the past 18 months, the collapse in values appears to be stabilizing with market confidence gradually returning.
Office Market Outlook – As the economy cycles away from the trough, organizations will move from consolidation to planning and growth phases. Over time it is expected that incentives will decrease with rents stabilising and eventually increasing. Empty office floors will shift from being viewed as an owner’s liability to an asset. Limited construction in the pipeline due to funding challenges suggests longer term availability issues.
In the short term the current office market remains an excellent time for tenants to secure new office space, but the opportunity for favourable negotiations has an end in sight. Longer term, Melbourne is poised to overtake Sydney for total prime office space due to land availability, affordability, economic growth and good access.