Commercial Property Snippets
Apr 4, 2017
Commercial Property snippets from across the Tasman
Sydney shrinks as Melbourne expands.
A commercial property construction boom in Melbourne – the biggest in more than two decades will make it the largest CBD office market (5.5 million sqm) in the country by 2020, outstripping Sydney. The tremendous expansion may well leave a bitter aftertaste for landlords as the dynamics of supply of space move in favour of the tenants.
Sydney’s market (currently 5.0 million sqm) which is constrained by geography, is moving in the opposite direction as office space is being withdrawn to make way for the Metro Rail Project and towers are being converted to other uses including hotels and residential.
Sydney Towers to hit 4.5%
A combination of plenty of investor appetite and a shortage of supply will potentially result in:
- Investment yields on prime Sydney towers could be squeezed to as low as 4.5% this year
- Prime net effective rents in Sydney projected to rise 35% in the period of 2017 - 2019
- Investment yields on prime Melbourne towers could be squeezed below as 5.0% this year
- Prime net effective rents in Melbourne projected to rise 18.7% in the period of 2017 - 2019
Demand is being driven both domestically and by major global funds as they compete for blue-chip commercial real estate. Overseas investors accounted for 42% or A$6.19 billion of total office transactions in 2016. The buying was dominated by Chinese Singaporean and US investors.
(Australian Financial Review)
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