New research from Cushman & Wakefield says CBD office markets experience the two-speed economy differently, with professional industry specific trends emerging in non-resource capitals.
Cushman & Wakefield’s MarketBeat report says resources continue to be the main driver of activity in the national office market.
It says major CBDs in non-resource states experience the two speed economy in ways that ‘don’t necessarily alter overall market fundamentals’, but in the emergence of submarket trends within some professional industries.
David Woolford, Cushman & Wakefield managing director Australia, says in the Sydney CBD an interesting sub market is Martin Place, where opportunities will be opening up for tenants in repositioned secondary space.
“Recent and pending relocations from Commonwealth Bank to Darling Walk and ANZ to 161 Castlereagh Street are paving the way for the rejuvenation of Sydney’s traditional financial heart,” Woolford says.
Meanwhile, as low economic sentiment and deceleration of the non-resource states impacts the Melbourne CBD office market, St Kilda Road has shown strong sales and leasing performance.
According to the report, A Grade buildings in the precinct demonstrated particular strength, with vacancy falling from 14.2 to 8 percent in the year to January 2012.
“As CBD rental rates increased and vacancies fell, St Kilda Road has proved a compelling option for tenants looking for well located, quality space at a cheaper price,” Woolford says.
“Nevertheless, Melbourne is expected to experience a slowdown in leasing activity after averaging net absorption over 125,000 sqm for the previous seven years, reflecting general economic sentiment and lingering global financial uncertainty.”
Woolford says economic uncertainty and poor sentiment has neutralised the impact of Queensland’s resources boom. He says tenants are reluctant to sign leases for long periods and pre-commitments are still required to get projects underway in Brisbane.
“A subdued development pipeline has seen existing landlords enjoy rental growth," he says. "While enquiries have fallen and deals are taking longer to execute, positive absorption is anticipated to continue as the need for pre-commitments stifle the commencement of new supply.”
“Demand for office space in Brisbane continues to be industry specific, with resources mining, government, professional and financial services the most active sectors.”
In Perth, legal firms are exercising ‘stayput’ lease options as the lack of relocation options in preferred premium and A Grade space becomes apparent, the report says.
“Large space users are struggling to identify suitable relocation options in Perth CBD, particularly prime grade space, as vacancy remains very low. Legal firms are a case in point,” Woolford says.
Corrs Chambers Westgarth, Clayton Utz and King & Wood Mallesons are all looking for space between 3,500 and 5,000 sqm, while Freehills has renewed at QV1 for the next 10 years.
“New building completions are well overdue in Perth, as pre-commitment levels are high, but few are scheduled for this year. As such, the tight vacancy rate and resource driven pressures are keeping Perth on the radar of investors.”