The commercial property market in Australia has experienced solid returns over the last few years. Despite this growth and low vacancy rates the Australia commercial property market remains vulnerable to global financial market turbulence and economic downturn. The following is an overview of the Australia commercial property market:

While the retail and industrial property sectors have experienced healthy gains since 2003, the office sector had a belated spurt in values during 2007, as shown in the chart to the right from ANZ's Commercial Property Outlook report April 2008.

According to ANZ's latest property outlook report, yields from office markets will soften over 2008 but the underlying supports are, at the moment, good in most capitals. Retail property yields are also expected to ease further with weak retail spending likely to weigh on the market in 2008-09.

While demand for office space has declined in response to the slowing economy, supply has also slowed. Vacancy rates in the Australian commercial property market have fallen sharply from 10.2% in 2004 to 3% in the middle of 2008, the lowest levels since the late 1980's.

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Despite a small lift in vacancy rates in the Sydney CBD, limited development opportunities will help keep the biggest commercial hub of Australia in fundamentally good shape.

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In Melbourne vacancy rates are expected to increase to 7.5% during 2010, due to economic conditions resulting in sluggish take-up of the new office space availability during the second half of 2008.

Adelaide has the potential of rental growth in the commercial property market due to a significant increase in demand and supply not keeping pace. ANZ property outlook report predicts that on the back of a strong resources sector, vacancy rates could be as low as 1% by end of 2011.

According to Colliers International’s biannual Global Office Real Estate Review Midyear 2008, Perth still holds the title of the tightest CBD office market in the world, with Brisbane dropping from number 2 to number 6, the report showed Perth had recorded the lowest vacancy in the world, at 0.3%, for the third time running in the biannual Colliers International report which covers 172 office markets across the globe.

For more information on the Australia commercial property market, call us in Sydney at +61 280 147 568 or contact us at email@healyconsultants.com

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