This article is from the Australian Property Journal archive
OFFICE rents are on their way up again in the Melbourne CBD for the first time since the impacts of the global pandemic were felt across the city, while Sydney and Brisbane remain steady.
According to Cushman & Wakefield’s Q1 Office Marketbeat research, Melbourne’s CBD office rents have not seen any gain since Q4 of 2019, but were showing healthy signs of recovery in the freshly finished Q1 of this year.
Prime net effective rents in Melbourne’s CBD spiked 6.3% over the quarter to $411/sqm, for an increase of 4.6% year on year.
“Despite lingering uncertainty, the Melbourne CBD office market is experiencing a welcome increase in office leasing enquiry, picking up strongly towards the end of the quarter,” said Chas Keogh, national director and joint head of office leasing Victoria at Cushman & Wakefield.
Keogh added that in March alone Cushman & Wakefield had 54 briefs totalling 71,000 sqm in the Melbourne CBD, which compared to March 2021, is an additional 26,000sqm.
Melbourne’s CBD office market was no doubt buoyed by the state government’s lifting of much of Victoria’s COVID-19 health restrictions, with working from home recommendations and indoor mask requirements at offices being wrapped up on February 25.
While at the same time, prime net incentives in the CBD are starting to decline, dropping 3.1% for Q1 to 39.5% as leasing enquiries rise.
“We continue to see CBD office leasing markets respond positively as the economic recovery gains momentum across the east coast,” said John Sears, head of research at Cushman & Wakefield, Australia and New Zealand.
In Sydney and Brisbane, despite uncertainty brought on by the ongoing realities of the pandemic and impacts of devastating impacts of the floods on the states at large, leasing enquiries held strong.
At the same time in the residential rental market, the floods have been tipped to only heighten the ongoing crisis of supply and affordability.
“While the recent wet weather events and ongoing uncertainty created by the pandemic delayed some tenants’ plans to return workers to CBD offices, we have seen leasing activity remain strong and the impact remain limited,” added Sears.
Prime gross effective rents for the quarter were largely stable in the Sydney CBD at $885/sqm, though this represents a 2.7% decline year-on-year.
While average prime grade incentives are still at 35% and gross face rents are steady at an average of $1,355 sqm per annum.
In Brisbane prime gross effective rents were also steady for the quarter at an average of $445/sqm per annum, with average premium grade incentives at 37.5%.
