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Commercial rent set for further growth 

26 January 2018

By Stephen Rose, Industry Marketing Manager at Commercial Property Guide

Commercial rent growth is getting better all the time, with Sydney rent expectations remaining the strongest nationally.

The Sydney office, retail and industrial markets performed well in 2017 with asking rents in the latter half of the year between 15% to 20% higher than 2016. The healthy national increase in commercial rents was mainly driven by Sydney and its lease prices increase of 12% from April into the new year shows no signs of moderating.  

Industrial rents jumped in April by about 7% for the last six months of 2017, while retail rents diverged to a much lower value from April onwards – possibly as the Amazon media impact hit its peak.

Commercial market optimism

The Commercial Property Guide’s Asking Price Index (API) reflects optimism towards commercial property lease prices in the office, retail and industrial markets.

Commercial rents for all property types across the major capital cities continue to have an accelerated rate of increase. At the start of 2017 the national increase was only about 5% annually but by the end of the year it increased to 10% per annum.

The API measures the change in asking price rents for advertised properties and excludes the automatic annual increases built into most lease contracts.

It also captures the expectation of real estate agents and their clients across the nation’s major markets. Each week rental prices per square metre are aggregated for each suburb into regions and those weekly changes are averaged on a monthly basis
The current rents are then compared to three months prior and presented as the API. 

Commercial market highlights of 2017

  • Commercial asking prices for rent had an accelerated rate of increase for 2017
  • There was a noticeable surge in rent from April onwards
  • Office lease price increases were the main driver in 2017
  • Retail sector rent changes reflected the expected impact of Amazon 
  • Sydney rent expectations have remained the strongest nationally 
  • The Sydney office sector was the strongest major component for 2017.