Office market recovery accelerates
Released 29 April 2011
Jones Lang LaSalle's Head of Research for Australasia David Rees said the recovery in the office sector is now well underway and demand strengthened further in Q1 2011.
"Market conditions are becoming increasingly tight at a very early stage in the current upturn.
"Perth continued its outstanding run with the vacancy rate declining to 5.6% in Q1 2011 from 7.3% in Q4 2010, reflecting increased demand from the resource sector. Among the major markets only Canberra recorded a rise in vacancy in the quarter from 12.2% to 12.6% and is yet to show signs of a turnaround."
Across CBD office markets, positive net absorption of 83,700 sqm was recorded in Q1, following a very strong 447,000 sqm recorded during 2010 (86% above the ten-year average figure). As a result, the national CBD office market vacancy rate fell to 7.4% in Q1 2011, from 7.9% in Q4 2010.
"The recovery story was further consolidated in the March quarter. However, further increases in net absorption may be limited by capacity constraints in the labour market and a shortage of office space.
"Even in Brisbane, the CBD vacancy rate declined in the March quarter, showing that the recent natural disasters are proving to be a transient shock to the long-term recovery profile," Rees said.
The strength in the labour market is further emphasised by the amount of space available for sub-lease. During the March quarter, sub-lease availability across the national CBD office markets fell by over 40,000 sqm and now accounts for only 0.7% of total stock.
On the supply side, just five small projects totalling 19,800 sqm completed across the country in Q1 2011. The largest of these projects was 7-9 Irvine Place, in Norwest Business Park, NSW (13,200 sqm). Three small projects also completed in Canberra (5,400 sqm) where a large supply pipeline continues to hold the overall vacancy rates in double digits.
Across other Australian CBD office markets, supply continues to decrease. Just 354,300 sqm is due to complete in 2011, compared with 506,900 sqm in 2010.