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News release


Melbourne’s CBD office market records the second highest net effective rental growth in the world, highest in Asia Pacific and outpaces Sydney in 3Q2016

JLL Global Office Index identifies Sydney and Melbourne as the only two Asia Pacific cities in the Top 10 Office rental performers of 110 global cites

JLL Research has released the Global Office Index, Q3 2016 , revealing Melbourne’s quarterly rental growth as the second highest result worldwide.  Over Q3 Melbourne CBD office net effective rents increased by 5.7% compared to 5.5% in Sydney, however on an annual basis Sydney continues to lead rental growth in Australia recording 19.7% as at the third quarter.

JLL Victorian Managing Director, David Bowden said, “The momentum is currently in Melbourne.  Melbourne has Australia’s most diverse economy and this has consistently smoothed the impact of economic shocks, with a number of different sectors growing and expanding. Victoria’s population growth is the strongest in Australia (114,900 people over the last 12 months) and  is contributing to the creation of positive economic activity across multiple sectors, including professional and financial services, education, information technology, health care, government departments and construction businesses.  

“Melbourne has the ingredients for growth, a population that is expected to grow at over 100,000 per year over the next decade, a ranking as the world’s most liveable city, a world class research and tertiary education sector and a catalogue of infrastructure projects to be rolled out over the next decade creating an environment for jobs growth and innovation.”

JLL Victoria Head of Office Leasing, Stuart Colquhoun, continued, “ Despite approximately 240,000 sqm being added to the market in new supply over the last 24 months, Melbourne’s office leasing activity has been elevated, resulting in a vacancy reduction from double digit levels to an equilibrium vacancy rate in the 7-9% range.

“We are beginning to experience the expected solid rental growth as the changed leasing environment impacts negotiations. Tenant activity and an increase in space requirements for substantial fitted project spaces has revealed a lack of supply in certain locations.  Landlords now have an opportunity to limit incentives and or grow face rents. 

“The Melbourne office market has entered an 18 month period of limited new office supply, which will continue to place downward pressure on incentives and in turn increases in effective rents.”

The JLL’s Global Office Index​ tracks the rental performance of prime office space across 110 major markets in Asia Pacific, Europe, the Middle East and the Americas. Globally Annual rental growth on prime office assets slowed to 2.9% in Q3 2016, down from 3.4% in Q2. Quarter-on-quarter rents rose by 0.5% compared to 0.8% in Q2 2016.

Mixed rental performance was recorded across Asia Pacific. Asia Pacific Grade A office rents increased 0.5% quarter-on-quarter (2.6% year-on-year) in Q3 2016, slightly slower than the 0.6% (2.5% year-on-year) growth recorded in Q2.  There was a marked shift in the pattern of rental growth as subdued growth in many Asian markets was offset by robust rent uplifts in Sydney and Melbourne. 

JLL Victorian Director, Strategic Research,​ Annabel McFarlane explains, “Australia’s two speed economy is being played out in the rental growth performance of Australia’s cites. Perth, Brisbane and to a lesser extent Adelaide continue to be impacted by declines in mining related investment, while Sydney and Melbourne have benefited from strength in the service-sector economy. 

“In addition, rental growth is highly correlated to vacancy levels with CBD office vacancy ranging from 7.2% in Sydney and 8.9% in Melbourne to 16.3% in Brisbane, 16.4% in Adelaide and 24.7% in Perth. Vacancy is expected to decline further in Sydney and Melbourne over the medium term. 

“Melbourne’s leasing demand has accelerated over the last 12 months, with the Melbourne market recording its strongest quarterly net absorption figure (67,510 sqm) since 2005. Net absorption totals 159,100 sqm for the year to date which is significantly higher than the long-term average of 60,600 sqm pa,” added Ms McFarlane.