No sign of office occupier demand slowing

Dexus Research today released the Australian Real Estate Quarterly Review for Q4 2018. The report paints a picture of office investments continuing to perform well in Australia’s relatively steady growth environment.

Office markets are benefiting from positive business conditions and there is no sign of demand slowing.

The office vacancy rate for the Melbourne CBD is 4.0%, the lowest in 30 years, while the Sydney CBD recorded its lowest in 18 years.

Melbourne is benefiting from a boost in Victorian population growth of 0.7 percentage points per annum over the national average.

In the Sydney CBD, while a lack of availability of large contiguous areas of office space is limiting absorption, office enquiry levels are up substantially since last year.

Office construction levels remain modest across most major markets, putting downward pressure on vacancy rates.

A steady cost of capital should continue to support investment demand in the short term, with superannuation funds being active buyers.

Australia is likely to avoid the rising interest rate cycle which is causing concerns about future growth prospects and asset pricing in the US.

Mergers & Acquisitions activity has increased, driven by limited available opportunities in direct property investment and Australia’s attractive yields on a global scale.