Office markets to benefit from a surge in jobs growth
The Australian Real Estate Quarterly Review Q1 2018 focuses on the drivers of demand for office space in the year ahead.
Office markets will benefit from a surge in jobs growth, including in Queensland and Western Australia where economic recovery is lagging the eastern seaboard.
Over 400,000 jobs were created in Australia last year, the highest rate of growth in twelve years and double the long term average.
Businesses are hiring again, which bodes well for office demand across the country in a year when very little new space is being supplied to the market.
The short term outlook for the Sydney and Melbourne CBDs is strong where vacancy rates are already below average at 5.4% and 6.4% respectively and are expected to tighten further.
Face rents in Sydney and Melbourne have risen by 8% to 10% over the past year, and we expect further growth in the year ahead.
While higher rents will encourage construction of new office buildings in Sydney, the potential new supply is some years away.
Brisbane is a turnaround story with 33,000 square metres of office space taken up last year. The prime vacancy rate has fallen to 10% from a peak of almost 17% two years ago.
The Perth office market has bottomed and after four years of contraction, demand has turned positive.
Investors in property markets are being rewarded by growth in the service sector in Australia led by education, health and information technology. The professional services and finance industries are also growing solidly.