Good time to be a landlord as vacancies tighten: Colliers report
CBD office vacancies will fall across Australia’s three largest cities over the next year, making it a good time to be a landlord, a Colliers International report shows.
Withdrawal of office stock and refurbishing of lesser-grade space to attract smaller tenants in Sydney, falling incentives in Melbourne and an end to the supply cycle in Brisbane all point to a tighter leasing environment for tenants, Colliers’ CBD Office: Research & Forecast Report says.
Sydney’s CBD office vacancy rate will slip from 6.2 per cent in the first half of 2017 to 4.1 per cent next year. Melbourne will narrow from 6.4 per cent to 5.6 per cent, and Brisbane will tighten to 14.6 per cent from 15.3 per cent, the report says.
“The landlord’s market is in full swing in Sydney and Melbourne,” John Marasco, Colliers International’s chief executive for Victoria, said.
“Enquiry levels are still strong, with the majority coming from business services, health and community services, IT and finance, which is resulting in a more positive environment than what has been experienced in the past few years.”
The report, just weeks after the Property Council of Australia’s biannual Office Market Report said new office supply over the next three years would be just half the volume constructed in the last 18 months, highlights the slow growth of new supply, particularly in the strong Sydney market.
Period of respite
“Sydney will enjoy a brief period of respite from negative net supply over the next six months as refurbishments come online, however, negative net supply will quickly return for the subsequent 18 months,” the report says.
The city will return to net positive supply in the first half of 2019, when withdrawals ease and new stock completions start.
“We anticipate that vacancy will trend lower to a floor of 3.7 per cent in early 2020 before rising to 5.6 per cent by mid-2022,” it says.
Melbourne’s vacancy rate will bottom at 4.2 per cent by the end of next year, and in Brisbane vacancies are expected to hover around 14 per cent and 15 per cent over the next five years.
The situation was likely to boost investment volumes from 2016, as domestic and offshore building owners trade out of their profitable assets.
“With large players, both domestic and offshore, striving to achieve access and scale, we expect more capital partnering, like what was witnessed between Charter Hall and Morgan Stanley last year for 1 Shelley Street in Sydney, and possibly more merger-and-acquisition opportunities to emerge in 2017,” Mr Marasco said.
