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Light at the end of the tunnel
Posted on 2010-02-04
BUSINESS confidence is rising and tenant demand is improving. However the Property Council said the office market will remain on a tightrope in the year ahead, as almost 1 million sqm of space is added. The latest Council’s latest Office Market Report (OMR) for the six months to January 2010 revealed that tenant demand and a continued supply of new stock has pushed the national vacancy rate higher by 1% to 9.3% -- the highest level since January 2005. During the period, net absorption was just 11,452 sqm compared to the historic average of 197,565 sqm. However the January 2010 figure is a significant shift against the -160,000 sqm result recorded over the first half of 2009. Property Council CEO Peter Verwer said new supply also played a part in the vacancy increase. During the period, more than 387,000 sqm of space was added, one-third more than the historic average. "But the big issue facing the market is continuing weak demand. While our research shows an encouraging swing toward positive tenant demand in the past six months, it is just 1/20th of the historic average,” he added. Meanwhile tenants are slowly reemerging in the CBD markets. As a result, vacancy rose from 7.3% to 8.0% and all but one CBD market remains below 10% vacancy. But the shift towards CBD meant suburban office markets have taken a battering. Vacancy in the non-CBD market increased from 10.3% to a staggering 12.1%, the highest vacancy rate in this market in almost 15 years. Net absorption was -56,550 sqm, the lowest on record and the second consecutive negative result. Two-thirds of the 18 suburban markets have recorded vacancy rates of more than 10%. Verwer said whilst the swing in demand and the re-emergence of the CBD markets is encouraging, the prospect of new supply clouds the horizon. "Business confidence in the finance sector, one of the key occupiers of office space, is on the rise. CBD space is increasingly affordable, and is attracting tenants from the suburbs,” But he pointed out, a massive 968,600 sqm of new supply is due to come online in 2010. In the first half of the year alone more than 760,000 sqm will be introduced, the biggest addition of stock in one period on record compared to the historic average of 284,124 sqm. "Three-quarters of the stock to be added over 2010 will find its way to the CBD market, with only 58% pre-commitment,” he continued. However, Verwer expects the 2010 supply spike will be short-lived. “There is no evidence of a looming vacancy blow-out such as that of the early 1990s, which followed a supply tsunami delivered over several years,” he concluded. In 2011 a further 320,317 sqm is due to come online followed by 232,037 sqm in 2012. A total of 1,029,930 sqm is mooted. PropertyReview.com.au
DISCLAIMER: Every care has been taken to verify the accuracy of the information contained herein, but no warranty is given or implied and prospective purchasers/ tenants are advised to carry out their own investigations. Details herein do not constitute any representation by the vendor. Lessor or the agent and are expressly excluded from any contract.