Australian office markets well-positioned amid uncertainty
Dexus Research today released its Australian Real Estate Quarterly Review Q1 2019. The report highlights how Australian office markets are well-positioned in the face of uncertainty.
Leasing demand for office buildings is still strong, but there are signs that the accumulation of risks like the US/China trade war, volatile share market, slowing housing market and federal/state elections are beginning to weigh on business confidence.
It is unclear how these risks will play out, but whatever happens Australia’s main office markets are well-positioned given falling vacancy rates and modest supply levels.
The Sydney CBD vacancy rate of 4.1% is the lowest it has been in 18 years, with little supply coming through in FY20.
Demand for office space in the Melbourne CBD is benefitting from the strongest population growth in the country, with the vacancy rate of 3.7% at a 10-year low.
Vacancy rates in Brisbane and Perth are falling on the back of positive net absorption and broad-based service sector growth. In both markets, planned supply in FY20-22 is below average.
In addition to positive office market fundamentals, capital values are expected to be supported by continued strong investment demand from superannuation funds and foreign investors.
Investment demand will be supported by low interest rates in Australia and a preference for high-quality, income-producing office properties.