Will there be an Office Market Collapse?
Posted on 12. Aug, 2008 by Chris Lang in Global Scene, Office Markets, Property Cycles, Your Exposure
According to the recent Property Council (PCA) report in the Financial Review (AFR) ... the 6 months to June saw overall demand for offices fall around Australia — as business confidence has gradually waned throughout the world.
However, unlike the early 1990s, vacancy rates still remain low in all Capital cities. And at this stage, there is no oversupply — simply a slow down.
As you review the table, you'll see Brisbane and Perth vacancy rates remain very low. Prime rentals for both have been hovering around the $1,000 per sq metre mark. However, rentals in Brisbane are now falling; whereas Perth rents are still on the rise.
Perhaps the worrying aspect for both these cities is that their total office stocks are due to increase by 25% and 33% respectively.
The vacancy rate for Sydney increased slightly from 3.7% to 4.3%; but its level supply seems to be balanced.
Interestingly, the vacancy rate for Melbourne has fallen to 3.1% — it's lowest ever. And Adelaide has firmed to 3.7%.
Of all the cities, those two seem the least affected by global events. As such, you should see both Melbourne and Adelaide enjoy rental increases of around 10%, over the next 12 months.
However, the Canberra office market has soften and will continue that way for a while — mainly because of the traditional slump, following a change of government.
Bottom Line: Apart from Melbourne and Adelaide, researchers BIS Shrapnel see this as only a slowdown. Right now, there is no real over supply; and things should rebound next year.
