20.05.2013
How would you describe your market at the moment?
Melbourne, like many other Australian CBD office markets is characterised by a challenging demand environment. Occupiers remain reluctant to move or make long-term decisions while commodity and financial markets are volatile.
http://www.joneslanglasallesites.com/leasing/market-overview/melbourne-cbd-5
What was everyone talking about in Q1 2013?
Rents, incentives and demand. Effective rents are expected to remain under downward pressure with leasing incentives likely to increase. There will continue to be a disconnect between supply and demand over the short to medium-term. While net absorption is forecast to be slightly positive at 7,500sqm, this is well below the 10 year average of 90,000sqm.
Vacancy is forecast to exceed 10% by year end, notably driven by 123,500sqm of backfill space coming onto the market. Net increases in stock are forecast to be 123,500sqm in 2013 – the highest since 2008. Looking beyond 2013, there is only 160,900sqm of additional supply forecast to come online between 2014 and 2017. Commencements are expected to slow as pre-commitment activity becomes subdued.
What trends or events are influencing your market?
With market incentives circling 27% of net lease value, city fringe tenants have commenced their run towards the CBD. Recent transactions include IG Markets, TAL and Salta, and a range of current negotiations at hand. We expect this trend to continue throughout 2013.
The impact of the Federal Government election is yet to influence the Melbourne leasing market, although Commonwealth Government groups are constrained from committing to lengthy lease terms.
Locally, we anticipate CPA will be active over the balance of the year as major vacancies at 180 Lonsdale St and 385 Bourke Street gain leasing interest from groups like Telstra and Energy Australia respectively.
What is your prediction for the next quarter?
Vacancy rates are forecast to rise, moving above 10% by the year end as new developments come online, backfill space becomes available and we continue to see an increase in sublease space availability.
Business sentiment will remain fragile over the remainder of 2013, as occupiers remain reluctant to move or make long-term decisions when commodity and financial markets are volatile. While there is a greater focus on cost saving by larger companies which is having an effect on decision making processes, there still remains an appetite for new Prime grade buildings. There have been several large pre-commitments over the last few quarters including AGL at 699 Bourke Street and Corrs Chambers Westgarth & Leighton Holdings at 567 Collins Street.
Stuart Colquhoun
Head of Leasing, Victoria
stuart.colquhoun@ap.jll.com
Recent leasing deals
● UXC has leased 3,700sqm at 360 Collins Street, Melbourne.
● RSM Bird Cameron has leased 2,000sqm at 55 Collins Street, Melbourne.
● Australia Post has subleased 1,200sqm at 80 Collins Street, Melbourne from AON.
● Amazon leased 550sqm at 1 Collins Street, Melbourne.
Key Indicators
Market Balance, as at March 2013
Source: Jones Lang laSalle
http://www.joneslanglasallesites.com/leasing/market-overview/melbourne-cbd-5
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