Office Sector Set to Strengthen in 2011: Report

Australia’s biggest office market – Sydney – is expected to record a drop in CBD vacancy from 8.56 per cent, today to 7.16 per cent next January.

Net absorption (additional space leased less space vacated) is expected to be a healthy 125,000 square metres in the year to January 2012.

The agency expects about 133,035 square metres of new office supply will be added to the Sydney CBD office market in the next 12 months.

The report anticipates the financial and insurance services sector, and information media and telecommunications companies will drive Sydney CBD leasing activity in 2011.

By the end of this year, according to Colliers International, Adelaide will have the lowest CBD office vacancy – falling from 7.49 per cent today, to 5.3 percent.

Canberra will have one of the highest CBD office vacancy at 12 per cent, a fall from 12 per cent today.

Brisbane’s CBD office vacancy is expected to increase from 9.6 per cent to 12.8 per cent. Like last year, the market is expected to be driven by the professional, scientific and technical services sectors, as well as financial and insurance services groups.

The agency expects CBD office vacancy rates in Melbourne to fall from 6.35 per cent today, to 5.63 per cent in January 2012.

It cites net absorption of 106,000 square metres, but new supply of a low 16,000 square metres.

Led by the public administration and safety sector, Perth is expected to report a slight drop in office vacancy from 9 per cent to 8.59 per cent.

The report is featured in today’s AFR, in an article that also quotes Merrill Lynch research suggesting a drop in incentive levels (total rent paid minus leasing incentives – mostly paid in the form of a rental discount or a contribution to fitout).

ING Office Fund chief executive Tino Tanfara said effective rents (face rents less incentives) had bottomed, buy that landlords and tenants remained cautious. He said demand for space would strengthen as confidence returned.

Colliers International director of office leasing Simon Hunt said almost all tenants looking for more than 1000 square metres of office space would be searching for a high performing building to meet corporate and social responsibility benchmarks, and as competition for staff become more pronounced.


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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of