Conditions favour Melbourne office owners: CBRE
Melbourne office owners continue to sit pretty, with pent-up investor demand and record low vacancy rates creating a perfect storm for price growth, agents say.
A recent annual CBRE office forum, sponsored by RealCommercial, heard Melbourne office vacancy has dropped to just 3.2% in the first half of 2019, while white collar employment grew 4.4% last year, underpinning increased demand for offices.
And with vacancy tipped to remain tight, CBRE agents expect office owners to enjoy rental increases as high as 7% throughout the remainder of the year.
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But among the presentations at the forum were words of caution, with experts indicating a significant number of new offices will be completed in 2020 and 2021, leading to an increase in vacancy rates and incentives, and a slowing in rental growth.
However, current opportunities to purchase offices remain tight, with owners the beneficiaries.
“Whilst several transactions in the first half of the year have indicated that confidence is at all time highs for the office sector, the supply of opportunities, particularly in the $20-$120 million space has been well below the five-year average,” the forum heard.
“What this means is that every time a property comes to market for sale, we are seeing a great deal of pent-up demand where up to 10 or 12 offers are put forward by a range of domestic and international players looking to grow their office portfolio in Melbourne.”
CBRE Asian inbound capital lead Lewis Tong says that while some Chinese investment is still flowing into Melbourne, it continues to fall away. Instead, investment from Hong Kong and Macau is on the rise.
“For all of the reduced activity in the Chinese buyer segment, we are now seeing an uptick in activity from Hong Kong and Macau, which means we continue to trade over half of our office assets to international buyers,” Tong says.
