Office rents soar in Sydney and Melbourne
Plunging office vacancy rates are sending rents soaring in Sydney and Melbourne, with double-digit increases recorded in 2017-18.
JLL Research shows the Sydney CBD office vacancy rate is expected to drop to 4%, a level not seen since the 2000 Olympics. In the second quarter of 2018, the vacancy rate tightened from 5.5% to 4.5% after 51,100sqm of net absorption.
“At 4.5%, we are closing in on the 4% recorded in 2000,” says JLL managing director for NSW, Daniel Kernaghan. At the same time, rents rose, increasing 1.6% in the second quarter of 2018 and up 12.5% over the year.
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The Melbourne CBD vacancy rate also tightened significantly, contracting from 5.4% in the first quarter of 2018 to 4.6% in the second, the lowest since the third quarter of 2008. In the same period, Melbourne CBD rents climbed 2.7%, and by 10.7% over the financial year.
JLL head of research Andrew Ballantyne says it reflects the Victorian economy’s strength. “Professional services firms are in expansion mode, flexible space providers are growing their footprint and we continue to see a number of organisations centralise operations into the Melbourne CBD,” he says.
Perth also performed strongly, with net absorption double the historical average over the financial year. The CBD vacancy rate of 20.9% in the second quarter was the lowest in almost three years.
“BHP’s announcement that they will proceed with a new iron ore mine in the Pilbara is positive for sentiment across the Perth CBD,” Ballantyne says.
The Brisbane CBD vacancy rate headed the other way, rising from 13.9% to 14.4% as Aurizon moved into a development in Fortitude Valley.
This article originally appeared on www.theaustralian.com.au/property.