Record supply of office space to hit the market

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While there has been plenty of focus on the number of residential developments coming online across the country, new figures have revealed the commercial sector is also seeing a boom in stock.

According to real estate services firm CBRE, the second half of the 2015 calendar year is set to see a record amount of new office space hit the market.

CBRE estimates 350,000 square metres of supply will enter office markets across Australian CBDs in the six-month period.

The flood of supply is likely to continue a current trend of better quality office buildings, with CBRE describing the majority of the new supply as “A-grade buildings.”

Sydney, Brisbane and Perth, which are predicted to see record high levels of supply over the next 18 months, will be the markets to experience the biggest improvement in stock quality over the medium term.

Stephen McNabb, CBRE's head of research, said a combination of the improved quality of stock and current low rents would be good news for tenants.

“Coupled with the fact that on average the standard of accommodation has improved, this means new tenants haven't been getting this much value for money since 2004,” McNabb said.

While it is predicted to see a marked increase in stock in the near future, it appears Sydney has the required tenant demand to see it absorbed.

“Strong levels of net absorption in the first half of 2015 saw vacancy fall to 6.3% in June, compared to 8.4% from 12 months earlier,” CBRE regional director office services Andrew Tracey said.

“Given stronger gains in tenant demand and increased permanent stock withdrawal, the vacancy outlook over the next three years is lower than initially expected,” Tracey said.

In Melbourne, a trend of tenant migration to the inner city is expected to help fill new stock, while Adelaide and Canberra are also showing positive signs.

Demand conditions in Brisbane and Perth remain weak.
 

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