Over the last few years, the commercial property market in Australia has experienced solid returns. 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:

According toColliers International Global Office Real Estate Review Second Half 2009 report, Brisbane’s vacancy rate dropped from number 6 to number 8. The report covers 172 office markets across the globe.

While demand for office space is expected to remain positive in the short term, the levels are unlikely to be high enough to fill the office space completed in the last round of projects and the backfill space created in existing premises by relocating tenants. A rise in total vacancy rates are thus expected which is likely to peak of about 10% during 2010, following ANZ’s relocation to the Docklands and its subsequent vacation of several prominent buildings in the traditional CBD grid. As vacancy increases, downward pressure on rents is expected (Marketview CB Richard Ellis Report).

Melbourne’s CBD Office is experiencing stable rents and relatively tight yields compared to other Australian capital cities. Incentives have now crept back into the market (Marketview CB Richard Ellis Report).

Since June 2009 Sydney CBD Office has experienced a peak of prime office spaces since 1994. Rentals have declined by 2.5% and yields for prime properties have softened further over the last quarter of 2009 (Marketview CB Richard Ellis Report).

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Brisbane’s CBD Office rents on the other hand have fallen by approximately 10-15% over the past 12 months. This is combined with rising incentives, averaging between 16.3%, which means that net effective rents have decreased over the year (Marketview CB Richard Ellis Report).

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Adelaide’s commercial property market is in reasonable balance and is expected to remain stable through the cycle. Adelaide’s moderate rise in property prices and rentals despite declines in other cities and its solid fundamentals suggest stability and a positive outlook for years to come (Marketview CB Richard Ellis Report).

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According to ANZ's August Property Outlook 2010 report, with interest rates forecast to rise, house price growth may temporarily slow down to low single digits in 2011. But in the absence of a major economic downturn, the current shortage of housing could lead to further increases in the costs of buying and renting. Hence, housing affordability is still an issue in many parts of Australia.

For further 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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