Sydney and Melbourne top for office rent growth
Australia’s two largest CBD office markets have topped JLL’s latest global list for office rental performance, with annual prime rents growing by 30.1 per cent and Melbourne by 17.3 per cent.
JLL’s latest Global Office Index for the third quarter shows Sydney is way out in front globally in the number one spot for annual growth year-on-year.
Cities in the United States came in next, with San Francisco Peninsula in third spot, after Melbourne, at 12.9 per cent annual rental growth, New Jersey at 12.2 per cent and Portland in fifth position at 10.4 per cent. Chicago, Amsterdam, Madrid, Stockholm and Toronto round out the top 10.
Tim O’Connor, JLL’s head of office leasing in Australia says Sydney has consistently featured in the top 10 global performers rankings for the past five years and Melbourne for the past two years.
“Two years ago, Sydney ranked number one, while Melbourne was ranked fifth. While the Sydney story has continued on the back of centralisation, stock withdrawals and growth from the technology sector in particular, Melbourne is now following hot on the heels,” O’Connor says.
“The sharp reduction in vacancy that precipitated the upward pressure in Sydney and Melbourne rents has been amplified by the lack of available new supply coming on line in the short term.
“The number of options for larger space users in existing stock now means demand will be expressed through additional pre-commitment activity.”
JLL’s latest index finds that rental growth for prime offices across the 125 major markets continues to “pick up pace”, rising by 2.7 per cent year-on-year. This is significantly above the 10-year average growth of 1.6 per cent.
JLL expects momentum to continue in 2018, with a projected uplift of 2.3 per cent globally.
“Sydney and Melbourne effective rental growth was in double digit territory over 2016 and 2017,” says JLL’s head of research in Australia, Andrew Ballantyne.
“We expect that effective rental growth will ease back from this rate in 2018.
“Nevertheless, Sydney and Melbourne effective rental growth is projected to remain above seven per cent in 2018 with the potential to be even higher if the competition for space exerts further downward pressure on leasing incentives.”