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News release


Signs of stabilisation across CBD office markets

The rise in sub-lease availability was stymied in Q3 with CBD office markets recording the first quarter of positive net absorption since 4Q12

​AUSTRALIA, 16 October 2013 – Statistics released by Jones Lang LaSalle Research show that the physical market conditions started to stabilise in Q3. 

Jones Lang LaSalle recorded positive net absorption of 12,500 sqm across CBD office markets over the quarter. However, the national CBD office market vacancy rate increased to 11.3% – the highest rate since 1Q99. 

Over the quarter, positive net absorption was recorded in Canberra (30,400 sqm) and Melbourne (23,300 sqm), while Sydney was zero. Negative results were recorded in Perth (-24,500 sqm), Brisbane (-12,800 sqm) and Adelaide (-3,400 sqm). 

Jones Lang LaSalle’s Head of Office Leasing, Australia & NSW, Tim O’Connor said, "Business confidence has rebounded post the Federal Election. Stronger business confidence has stymied the rise in sub-lease availability."

Sub-lease availability was unchanged over Q3. Nevertheless, Jones Lang LaSalle recorded 315,000 sqm of sub-lease space across CBD office markets, equating to 1.88% of total stock. Perth (3.90% of total stock) and Brisbane (2.87% of total stock) recorded the highest rate of sub-lease availability in Q3.

Five of the six CBD office markets are recording double digit vacancy rates. Brisbane (14.5%), Adelaide (13.1%), Sydney (10.7%) and Melbourne (10.5%) increased over the quarter, while Canberra recorded a moderate reduction in vacancy to 11.4%. 

Mr O’Connor said, "Perth is the only CBD office market recording a single digit vacancy rate. Nevertheless, the downsizing of mining and mining-related services firms has resulted in a precipitous rise in the vacancy rate from 2.0% at the start of 2012 to 9.4% in Q3."

"While office market demand indicators have started to stabilise, corporate Australia remains cautious in committing to new space and lease negotiation times remain elongated compared with historical norms," said Mr O’Connor. 

The leasing market is expected to remain challenging in 2014, but there are early signs of a recovery in enquiry which will translate into increased leasing activity in 2014.
Mr O’Connor said, "One of the ingredients for a market recovery is an increase in business investment spending. Corporate Australia has under-invested in infrastructure over the past 3-5 years. At some point, corporate Australia will reactivate business spending plans and make investments in IT infrastructure projects. This will flow through to the demand from professional services and information services firms."

In the investment markets, Jones Lang LaSalle recorded $2.4 billion worth of office transactions (above $5 million) over the quarter and $11.0 billion over the past 12 months. 

Jones Lang LaSalle’s Head of Capital Market Research, Andrew Ballantyne said, "The high levels of transaction volumes illustrate the strong demand for core real estate. The most active buyers are domestic wholesale funds and offshore investors. 

"Interestingly, we continue to see new capital sources looking for exposure to the Australian real estate markets. The weight of capital targeting prime grade assets will generate pricing tension and will likely result in further yield compression for long dated lease assets in 2014," said Mr Ballantyne.