The Sydney CBD commercial office market will be the dominant participant in 2008. A growth in leasing action is likely to occur with companies re-examining the assortment of purchasing as the expenses of borrowing the most important thing. Strong tenant demand underpins a new round of structure with different new speculative buildings likely to move.
The vacancy rate is very likely to collapse before new stock can comes onto the market. Strong demand and a lack of available possibilities, the Sydney CBD marketplace is very likely to be an integral beneficiary and the standout player in 2008.
Strong demand coming from company growth and growth has fueled demand, however it has been the decrease in stock that has largely driven the reduction in vacancy.
Ongoing strong white-collar employment growth and healthy company gains have continued demand for office space in the Sydney CBD within the second half of 2007, leading to positive net absorption. Driven by this tenant demand and dwindling accessible area, leasing growth has quickened. Incentives offered by landlords continue to decrease.
The complete cbd olie office market absorbed 152,983 sqm of office space during the 12 months to July 2007. Demand for A-grade office area was particularly strong with the A-grade off marketplace absorbing 102,472 sqm. The premium office market demand has decreased significantly with a negative absorption of 575 sqm.
With negative net absorption and increasing vacancy rates, the Sydney market was struggling for five years between the years 2001 and late 2005, when things began to change, however vacancy remained in a fairly high 9.4% until July 2006. Due to competition in Brisbane, and also to a lesser scope Melbourne, it’s been a real battle for the Sydney marketplace in recent years, but its core power is presently showing the real outcome with probably the greatest and most soundly established performance indicators because early on in 2001.
The Sydney office market currently recorded the third highest vacancy rate of 5.6 per cent in comparison with all other major capital city office niches. The highest growth in vacancy rates recorded for complete office space across Australia was for Adelaide CBD with a slight increase of 1.6 percent from 6.6 percent. Adelaide also listed the highest vacancy rate across all significant capital cities of 8.2 percent.
The city that listed the lowest vacancy rate was the Perth commercial marketplace with 0.7 percent vacancy rate. Concerning sub-lease vacancy, Brisbane and Perth were one of the better acting CBDs with a sub-lease vacancy rate at just 0.0 percent. The vacancy rate may also fall further in 2008 as the restricted offices to be delivered within the subsequent two years come from leading office refurbishments of which much has already been committed to.
Where the market is going to get really interesting is in the end of the season. If we presume that the 80,000 square meters of new and refurbished pole re-entering the current market is absorbed this year, coupled with the second quantity of stick additions entering the market in 2009, vacancy rates and bonus amounts will truly plummet.
Even the Sydney CBD office market has taken off in the last 12 months with a huge drop in vacancy rates to an all-time low of 3.7%. This was accompanied by leasing growth of up to 20% and a marked decline in incentives during the corresponding period.
Strong demand coming from business growth and expansion has fuelled this trend (unemployment has fallen to 4 percent its lowest level since December 1974). However, it has been the decrease in stock which has largely driven the tightening in vacancy with restricted distance going into the market in the next couple of years.
Any evaluation of future market conditions should not dismiss some of the potential storm clouds on the horizon. In the event, the US sub-prime catastrophe causes a liquidity problem in Australia, corporates and customers alike will locate debt more expensive and more difficult to get.