East Coast CBD office demand surges in Q1

East Coast CBD office demand surges in Q1East coast CBD office demand reached a four-year high in the March 2015 quarter, but business confidence and consumer sentiment remain subdued, according to the DEXUS ‘Australian Real Estate Quarterly Review Q2/2015’.The review, which reports on the current state of Australia’s office, industrial and retail markets, states that Sydney, Melbourne and Brisbane all recorded an increase in occupied stock.”Office demand is a full year into its current growth cycle, with the increasing absorption of space providing a welcome reduction in vacancy ahead of new supply in FY16,” said Peter Studley, DEXUS general manager of Research.”Looking forward, the economic indicators are somewhat mixed and confidence is a constraint. However, the outlook is still for measured improvement in occupier demand in the office, industrial and retail sectors in the year ahead.”The Australian economy’s subdued performance in FY15 will be followed by only slightly faster growth in FY16, according to the review. The key characteristics of the investment climate in the short term will include: the NSW economy outperforming other states and driving national growth; growth in residential construction and consumer spending stimulated by low interest rates; weak commodity prices; a softening of the Australian dollar relative to the US dollar, making Australian exports more competitive; and cheap debt at a domestic and international level, ensuring strong competition for investment stock in the foreseeable future.The effect of these mixed indicators will be divergent growth patterns by region and industry, states the review. However, an improvement in occupier demand is expected.Projected employment growth in most industries other than mining will drive office demand. And retail spending and industrial demand should benefit from low interest rates and a drop in fuel prices. To download the report click here