This article is from the Australian Property Journal archive
LEASING demand in the office market has continued to increase and is 38% higher than a year ago, according to Jones Lang LaSalle.
The Jones Lang LaSalle analysis of leasing enquiry levels found that aggregated leasing enquiry in the CBD markets of Sydney, Melbourne, Brisbane and Perth are 38% higher than a year earlier and 27% above pre-Lehman Brothers levels.
Jones Lang LaSalle’s office research director Andrew Ballantyne said positive net absorption of 433,000 sqm was recorded in the 12 months to June 2010 and the continued growth in leasing enquiries to September is a positive sign for office demand.
“There was a noticeable dip in business sentiment in Q2 and a feeling that a number of companies, especially those headquartered in the US, might delay space decisions.
“However, equity markets rebounded strongly in August and September, fears of a double dip recession in the US are receding, and the Australian GDP growth figure (3.3% year-over-year) came in ahead of expectations for the June quarter,” he added.
Ballantyne said vacancy rates in office markets are low for this stage of the cycle with the Sydney and Melbourne CBD office markets facing supply-side constraints in 2011 and 2012.
JLL’s Australian head of leasing Kevin George said Melbourne is leading the recovery with enquiry levels rebounding first and have continued to show strength, up almost 20% in the 12 months to September 2010.
“What makes the Melbourne figures even stronger is that the current level of enquiry does not include the recent pre-commitments made by the Australian Taxation Office, Melbourne Water, and more recently National Australia Bank.
“There are further large pre-commitment requirements in the market with some major decisions to be made by tenants such as Marsh Mercer, Freehills and BHP Billiton that will provide further clarity to the development outlook in the Melbourne CBD,” he added.
George said demand indicators for the Sydney CBD are also improving.
Net absorption in the 2009-10 financial year was over 100,000 sqm, sub-lease availability has declined to 1.55% of total stock and leasing enquiry figures were up almost 60% in September 2010 from the trough recorded a year earlier.
He said a number of tenants have based their space requirements on current headcount and will seek to accommodate growth by using their space more efficiently.
“However, the increase in leasing enquiry figures points towards stronger levels of activity in late 2010 and 2011. Yet to be leased office space in recently completed (and upcoming) projects will start to be absorbed and rents should start to rise in early 2011,” he predicted.
In Brisbane, leasing enquiries have improved by 48% in the 12 months to September 2010, as enquiry from the resources sector picked-up following the re-negotiation for an MRRT to replace the RSPT.
George said although enquiry from mining and mining related firms has improved, there have been stronger signs from a range of industry sectors in Brisbane.
“A number of tenants that elected to take short-term options in 2008-09 are coming back to the market to explore longer-term accommodation strategies. However, the time taken to commit is elongated compared with historical norms,”
Meanwhile the Perth market continues to follow the resource cycle like the Brisbane CBD and enquiries have rebounded following the mining tax compromise and are up 26% from a year earlier.
George said the announcement of the Gorgan Gas project in mid-2009 was the catalyst for increased enquiry and activity.
“We estimate that Chevron’s occupational footprint has grown by 35% to 40% in the past 12 months and this has had a positive impact on enquiry levels from mining related services firms,” he continued.
George predicts leasing enquiries will continue to increase across all CBD office markets in 2011 and 2012 as the demand typically lags business confidence and employment figures.
“Throughout the GFC, multi-nationals cut their capital expenditure budgets. As the economy moves above trend growth in 2011, businesses will plan for expansion and there will be an improvement in business investment spending and an upturn in project space requirements over the next 12-24 months,” he concluded.
Australian Property Journal
