News & Discussion: CBD Real Estate & Market Conditions

[Diamond]

The Christmas lights have now been switched on. Looks fantastic with the red 'W' at the top of the tree

[Howie]

Tight supply drives up office rents

http://business.smh.com.au/tight-supply ... -1fqd.html

OFFICE markets experienced record-breaking growth around the country this year.

It was the year when landlords came back as the rulers of the CBD rental market thanks to high office demand and zero new supply.

One of the very few new developments to be finished was the American Express building at King Street Wharf, by Multiplex.

The completion of Multiplex's 12 Shelley Street brings the total value of finished product at the $1.1 billion King Street Wharf precinct to about $800 million, with only Multiplex's One Shelley Street (Macquarie Bank building) and an Ibis Hotel, both under construction, remaining before the landmark precinct is fully completed.

The 11-storey, 12 Shelley Street building comprises 14,954 sq m of net lettable area. American Express has leased the entire commercial office component (14,492 sq m) under an 11-year lease.

Record low vacancy levels were experienced in the Brisbane CBD, Perth and West Perth markets. Subsequently net effective A-grade rents in these markets grew 35 per cent, 45 per cent and 4 per cent respectively. Adelaide CBD experienced the highest net absorption since the Property Council of Australia started collecting data more than 15 years ago.

Savills predicts vacancy levels in Sydney will be about 4 per cent at the beginning of next year, and will fall to about 2.5 per cent by the end of 2008.

The firm said the city would experience modest net absorption with white-collar employment growth, but the biggest factor affecting vacancy would be a number of secondary buildings being taken out of the office market to build new A-grade office towers.

Savills' director of research, Belinda Nowland, said most notably these secondary-grade buildings were in the core area, and included five buildings on DB RREEF's "Space" development site and the Kindersley House development in O'Connell Street.

Secondary-market rents have not moved as quickly as A-grade rents, but are expected to grow solidly next year as vacancies in the secondary grade tighten.

"Sydney saw a dramatic tightening in the prime office space, and subsequently saw net effective A-grade rents rise by 28 per cent, and average incentives fall from 22.5 per cent to 15 per cent," Ms Nowland said.

"Going forward, we expect further tightening of the prime and secondary markets and strong rental growth over 2008."

At the beginning of this year, there was concern for the North Shore office market after Optus left several sites to move to its new premises in North Ryde.

There has, however, been surprisingly good tenant interest in the North Shore and it is predicted to continue.

LandMark White's NSW managing director, Tyrone Hodge, said the Sydney CBD commercial market had had a very strong year, with every sale seemingly setting a record low yield.

The market has been driven by fund managers and developers wanting to cash in on the lack of future supply of space.

"Many recent sales and lease deals have also reflected A-grade prices in non-core CBD locations. This trend is likely to continue in 2008 and will see a continued strengthening of other commercial markets such as North Sydney," Mr Hodge said.

The Parramatta director, Michael Clarke, said the Parramatta CBD had continued to grow in popularity with institutional investors in both the office and retail sectors of the market. "Whilst the core office area remains tightly held, the more fringe locations are being sought, around the railway/bus interchange," he said.

[Will]

Whilst I was waiting for an appointment today I read the October 23 edition of the SA Business Journal. In it, it stated that due to the uranium base of our mineral boom, Adelaide will have a longer demand cyle for commercial office property than either Brisbane or Perth. Furthermore, Adelaide will benefit because uranium is seen as a 'future technology' as opposed to the 'old technologies' of coal and iron ore. The article further stated that at the moment the Adelaide office market reflected the early stage of the resources boom we are in, with potential tenants still in the exploration phase. However in this regard, mineral exploration in SA for July 2007 was up to $84.1 million, overtaking Queensland for the first time in recent memory. Furthermore mining expenditure in SA has risen by 951% since 2002, compared with 220% in Queensland and a paltry 143% in WA. The good news continues, because despite the article stating that BHP-Billiton is still in the 'pre-pre-pre-feasibility study' phase in regard to Olympic Dam it will nevertheless expand its Adelaide presence by 200 staff, some of which are from interstate.

[jk1237]

nice to read, is it safe to say the boom is here and happening. On another note, its so nice to see office building focusing in the CBD rather than those horid little offices along Greenhill and Fullarton Rd built during the 80s-90s

[crawf]

And Glen Osmond Road, theres currently a 2 level building under construction.

[wilko91]

I agree, there is a large block located on Wakelfield St next to a Forme development that was finished a few years ago and the backpacker place. At the moment it looks like it is used as a car park and local graffiti hang out. Its sad to see these places under developed

[Shuz]

Well, considering that in Sydney theyre tearing down 100m+ buildings to make way for new towers, and we have vacant blocks here right in the CBD, why not make Adelaide CBD one of those Economic Tax-Free Zones like they have over in the Middle East. Now I know a lot of businesses would jump to the oppurtunity to capitalise on such prospects.

[ozisnowman]

Well, considering that in Sydney theyre tearing down 100m+ buildings to make way for new towers, and we have vacant blocks here right in the CBD, why not make Adelaide CBD one of those Economic Tax-Free Zones like they have over in the Middle East. Now I know a lot of businesses would jump to the oppurtunity to capitalise on such prospects.

Few simple words GREEDY STATE and FEDERAL GOVERNMENTS... They dont care about the look and vibrancy of a city especially Adelaide if that
vibrancy would be as the result of hitting their back pocket...

[Dave_The_Planner]

they are just crying out for australia's tallest building!!!!

Well, I'd settle for a 40 storey building before setting any kind of record. The good news though is that we are starting to see a greater density of high-rise buildings which will eventually mean height limitations being lifted. It would appear that for the forseable future, about 30-35 storeys is going to be our max.

[skyliner]

Take heart Dave, in the 1980's 18 floors was the max for ages - see ex AMP bldg on corner KWS and Nth Tce. Then it lifted to the 'black stump' in Grenfell St as the highest of all allowed according to ACC policy. Now its 30 35 floors so things are moving, however slowly.

As you say, density of high rise (and more and more applications being over height restrictions - and actually approved) will lift official height levels.(this is the verdict according to Adelaide development history anyway).I think the ACC is seeing that too many restrictions has turned development away.

ADELAIDE - TOWARDS A GREATER CITY SKYLINE

[aussie2000]

this is good news, although, it looks like there won't be any observation deck.

[bm7500]

this is good news, although, it looks like there won't be any observation deck.

"... the building was built as Santos House 20 years ago." WTF, some of the reporters at the Advertiser have no idea! Try the 'State Bank Building'..... it's also 31 stories high

[Mr.Frodo]

A bit of trivia for you, when it was built as the State Bank building, some of the floors in the old State Bank (now BankSA) building (97 KWS) were connected directly to the tower. I remember you could walk across from Level 1, 97 KWS and that connected with Level 2, State Bank Tower, and also Level 3, 97 KWS, connected with Level 4, State Bank Tower. The corridors which are still there now end with a door, which if you open, you see besser blocks! I never did go across to the tower to see what was on the other side. Much the same I guess!

[Like putty]

31 or 30 storeys - sorry, but a newbie question indeed. Is the convention to include or exclude the ground floor?

[Omicron]

If I were making a list of Adelaide Buildings That Need A Ground Floor Rejuvenation, Westpac House wouldn't be that high on the list. I still feel somewhat of a sense of occasion when entering the Westpac lobby - the high ceilings, granite and open spaces certainly help in that regard.