Docklands: Shifting the market dynamic for Melbourne CBD office
Australia ViewPoint
SUMMARY
Docklands has been the engine room of growth in the Melbourne CBD office market over the last decade or so and based on existing development will continue to be over 2013 and 2014. The historical strong growth has been well absorbed against a backdrop of strong conditions in the office occupier markets, which saw the Melbourne market outperform other capital cities in terms of space growth and yield. With occupier conditions now materially weaker, forthcoming supply in Docklands poses clear risks to CBD vacancy. To date, the market seems to be digesting this as part of a cyclical slowing, a rebalancing or “normalisation” after a period of strength, rather than posing a material risk to the long run performance of the Melbourne market. Yields have been relatively stable, particularly for premium assets. We think that is likely to remain the case through 2013 and 2014.
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