Office vacancy forecasts a tale of two markets

Office vacancy forecasts – a tale of two marketsUneven and diverging office vacancy rates around the country, highlighted in the January 2015 Office Market Report, look set to continue according to the latest Consensus Forecasts from the Property Council.The fractured market conditions are most obvious between the Sydney and Melbourne CBDs, where vacancy rates are forecast to remain stable over the next two years, and the former resources-driven markets in Perth and Brisbane where vacancy rates look set to soar in the short term.”Annual growth in domestic demand is diverging clearly between the stronger gains in New South Wales and Victoria and the ongoing contraction in Queensland and Western Australia – a pattern of demand that is reflected in relative office market performances,” said Bruce Wan, associate director, Real Estate Strategy at Macquarie Capital.Other findings in the Consensus Forecasts include:market experts overwhelmingly highlight Sydney CBD as the investment location of choice for the next 12 months; noting that high demand and conversion of office stock will offset the new supply due to come online;Sydney CBD and Melbourne CBD vacancy is forecast to remain stable over the next two years, at between 7.0 per cent and 8.5 per cent;Perth CBD vacancy is forecast to blow out to 19.8 per cent by January 2016; however, it’s anticipated to quickly recover in 2017 with a reduction of more than 2 per cent. Incentives are predicted to be near 40 per cent over the next two years;Brisbane’s CBD vacancy is forecast to peak by January 2017 to 18.4 per cent; however, rental growth is projected to strengthen;Canberra’s vacancy is expected to decrease in the next two years due to limited supply and new policy opportunities;rental growth will soften as demand continues to weaken in Adelaide CBD;Darwin and Hobart CBDs will see a spike in vacancy rates and firming rental growth in the two years to January 2017; andnon-CBD markets Parramatta and Southbank look set for the strongest rental growth over the next 12 to 24 months, with 4.0 per cent annual growth.The Autumn 2015 Consensus Forecasts Office is a supplement to the Office Market Report and provides opinions from industry experts, including some of Australia’s foremost economists, ranking the best performing markets in the short to medium term throughout Australia.To order the Autumn 2015 Consensus Forecasts Office click here