Know more about CBD Oil
The city which recorded the lowest vacancy rate was the Perth commercial market with CBD Oil 0.7 per cent vacancy rate. In terms of sub-lease vacancy, Brisbane and Perth were one of the better performing CBDs with a sub-lease vacancy rate at only 0.0 per cent. The vacancy rate could additionally fall further in 2008 as the limited offices to be delivered over the following two years come from major office refurbishments of which much has already been committed to.
Where the market is going to get really interesting is at the end of this year. If we assume the 80,000 square metres of new and refurbished stick re-entering the market is absorbed this year, coupled with the minute amount of stick additions entering the market in 2009, vacancy rates and incentive levels will really plummet.
The Sydney CBD office market has taken off in the last 12 months with a big drop in vacancy rates to an all time low of 3.7%. This has been accompanied by rental growth of up to 20% and a marked decline in incentives over the corresponding period.
Strong demand stemming from business growth and expansion has fuelled this trend (unemployment has fallen to 4% its lowest level since December 1974). However it has been the decline in stock which has largely driven the tightening in vacancy with limited space entering the market in the next two years.
Any assessment of future market conditions should not ignore some of the potential storm clouds on the horizon. If the US sub-prime crisis causes a liquidity problem in Australia, corporates and consumers alike will find debt more expensive and harder to get.
The Reserve Bank is continuing to raise rates in an attempt to quell inflation which has in turn caused an increase in the Australian dollar and oil and food prices continue to climb. A combination of all of those factors could serve to dampen the market in the future.
However, strong demand for Australian commodities has assisted the Australian market to remain relatively un-troubled to date. The outlook for the Sydney CBD office market remains positive. With supply expected to be moderate over the next few years, vacancy is set to remain low for the nest two years before increasing slightly.
Looking forward to 2008, net demands is expected to fall to around 25,500 sqm and net additions to supply are expected to reach 1,690 sqm, resulting in vacancy falling to around 4.6% by December 2008. Prime rental growth is expected to remain strong over 2008. Premium core net face rental growth in 2008 is expected to be 8.8% and Grade A stock is likely to experience growth of around 13.2% over the same period.
With this in mind, if demand continues as per current expectations, the Sydney CBD office market should continue to benefit with rents rising due to the lack of existing stock or new stock being offered until at least 2010.