The year started off with great panache seeing strong levels of tenant activity across all markets. Unfortunately this wave petered out as the financial reporting season arrived. The past six months however has seen a flurry of activity with many notable deals concluded including Marsh Mercer, ATO, NAB and Melbourne Water in Docklands, and Origin Energy at 321 Exhibition Street. So despite everything else that’s happening in the world we have seen a solid performance reflecting a general air of confidence.
By Chris Goodwin - Goodwin Property Advisory Group
Increased confidence and tenant demand is beginning to see vacancy rates across all markets start to reduce. The lack of new development and construction finance and appetite of the financial markets to fund new development is and will continue to see significant shortages occur over the next two to three years particularly in Melbourne.
Consequently it does not take a rocket scientist or even a real estate agent to tell you rents will “shoot up” and market incentives and choice shrivel. There is still a bit of fat in terms of supply in the Brisbane and Sydney markets that will temporarily ease the pain. The Melbourne market will present challenges to tenants seeking large A+ grade five star Green Star /NABERS rated floor plates.
Advanced planning is critical for organizations seeking to control ongoing occupational costs as the market inevitably tightens. Such planning should involve a review of workplace practises and existing and future accommodation needs. Action should then be taken to identify appropriate premises that will meet the needs of the business over the foreseeable future be they existing or new, and lock into appropriate lease agreements that benefit from current low rental levels and yes incentives –they are still out there. Dependent on grade of building and location 15-20% and 20-30% incentives are still to be found in Melbourne, and Brisbane and Sydney respectively.
Good hunting and best wishes for the new year....
Chris Goodwin is the principal of Goodwin Property Advisory