Perth retains global office market mantle

PERTH has retained the mantle as the world's tightest CBD office market. According to Colliers International, the city is also the most expensive in Australia.

Colliers’ biannual Global Office Real Estate Review Midyear 2008, Perth had recorded the lowest vacancy in the world, now at 0.3% for the third time running in the 172 global office markets covered in the report.

 

The city’s record vacancy was ahead of the CBD markets in Bucharest and Santiago which both posted a 0.5% vacancy and Seoul at 0.7%.

 

And Perth also moved up the rankings for most expensive CBD office markets, coming in at number 18 with an average A grade gross rent of $US 80.34/sf ($AU900.00 per sqm).

 

The most expensive average A grade gross rent was recorded in Hong Kong at $213.68 USD/ sf.

 

But Brisbane has slipped down the rankings from number two to six. The city previously held the second lowest vacancy at 0.7% in March, however the rate is now 1.2%.

 

Melbourne was ranked 18^th with a vacancy rate of 3.1%, Adelaide at 24 with 3.9% and Sydney at 26 with 4.3%.

 

Colliers’ managing director of office leasing Simon Hunt said the findings show the Australia is holding strong amidst volatile global conditions.

 

“The fundamentals are still very sound and, on the whole, I think we are seeing the Australian office market settle into a comfortable position on a global scale,” Hunt said. “We still have a reasonably strong economy. Unemployment rates are still very low, and we have only seen minimal retrenchment occur in the financial sector,”

 

“This is playing out in an ongoing strong level of office leasing enquiry. We haven’t seen it drop off at all, particularly for good quality stock,” he added.

 

Meanwhile Brisbane rents, which were ranked number 14 in the last report moved down to 26 with an average A grade gross rent of $66.95 USD/ sf ($AU750.00/sqm). Sydney came in ahead, ranked 24^th most expensive at of $68.74 USD/ sf ($AU770.00/sqm).

 

Colliers’ commercial research director Felice Spark said despite the year long volatility shown in financial markets around the world, many office markets continue to post solid fundamentals.

 

“While demand for office space was below the record pace witnessed for much of 2005-2007, the first half of 2008 was back to trend in many markets,” she added.

 

According to the report, much of Asia Pacific, Central and Eastern Europe, Latin America and the Middle East continued to register robust leasing conditions with lower vacancies and higher rents, while only major financial centres in Western Europe and North America reported signs of weakness.

 

Vacancy Rates: Tightest Office Markets in the World

RANK	City	Country	Vacancy – June 2008
1	Perth	Australia	0.3
2	Bucharest	Romania	0.5
2	Santiago	Chile	0.5
3	Seoul	South Korea	0.7
4	Geneva	Switzerland	0.8
5	Doha	Qatar	1.0
5	Lima	Peru	1.0
6	Brisbane	Australia	1.2
7	Bogota	Colombia	1.3
8	Buenos Aires	Argentina	1.5
8	Hong Kong	China	1.5
9	Regina, SK	Canada	1.6
10	Vilnius	Lithuania	1.8
11	Tirana	Albania	2.0
11	Abu Dhabi	UAE	2.0
12	Warsaw	Poland	2.1
13	Rio de Janeiro	Brazil	2.3
14	Istanbul	Turkey	2.4
15	Pretoria	South Africa	2.5
16	Wellington	New Zealand	2.8
17	Toulouse	France	3.0
17	Podgorica	Montenegro	3.0
17	Oslo	Norway	3.0
17	Dubai	UAE	3.0
17	Kyiv	Ukraine	3.0
18	Melbourne	Australia	3.1
19	Sao Paulo	Brazil	3.2
20	Montpellier	France	3.5
20	Saint Petersburg	Russia	3.5
20	Tokyo (Central Wards)	Japan	3.5
21	Moscow	Russia	3.6
22	Calgary, AB	Canada	3.7
22	Victoria, BC	Canada	3.7
22	Sofia	Bulgaria	3.7
23	Klaipeda	Lithuania	3.8
24	Edmonton, AB	Canada	3.9
24	Strasbourg	France	3.9
24	Adelaide	Australia	3.9
25	Vancouver, BC	Canada	4.0
25	Zagreb	Croatia	4.0
26	London Docklands	United Kingdom	4.3
26	Sydney	Australia	4.3
27	Tel Aviv	Israel	4.5
28	Sandton	South Africa	4.6
29	Shanghai	China	4.7
30	Copenhagen	Denmark	4.8

 

But Asia Pacific posted uneven results during the first half of the year with the regional average vacancy rate decreasing by 20 basis points to register 7.9%.

 

Spark said the fall during the first half of the year were largely the result of most Australian, Chinese and New Zealand markets reporting substantial lower vacancies compared with that reported at the beginning of the year.

 

Most major financial centres such as Hong Kong, Singapore, Tokyo, Shanghai and Sydney, however, showed more vacancy than six months ago with Hong Kong the only exception with a 20 basis point decline.

 

Office rents within the region generally maintained an upward trend with just three exceptions. Tokyo, Singapore and Seoul all registered declines in rents ranging from 3% to 19%.

 

The Asia Pacific region remains characterised by high levels of office construction with Beijing, Delhi,

Guangzhou, Seoul and Shanghai, where at least 10 million square feet of construction is currently underway in each market, 99 million square feet in total.

 

Looking forward to the latter half of 2008 and 2009, Sparks said office markets in all regions are expected to become more subdued as the global economy slows and lenders remain cautious.

 

“To date, developing economies remain largely unfazed, and continue to show solid growth and a healthy appetite for office space.

 

“On the demand side, most economies across the region are expected to continue posting very high growth rates, although not at levels witnessed for the past several years,” she concluded.

 

Australian Property Journal