The Sydney CBD commercial office market would be the prominent player in 2008. A rise in leasing activity probably will take place with businesses re-examining the choice of purchasing as the expense of borrowing drain the underside line. Strong tenant demand underpins a new round of construction with several new speculative buildings now more likely to proceed.
The vacancy rate will probably fall before new stock can comes onto the market. Strong demand and too little available choices, the Sydney CBD market is probably be a vital beneficiary and the standout player in 2008.
Strong demand stemming from business growth and expansion has fueled demand, however it's been the decline in stock that has largely driven the CBD oil Wholesale in vacancy. Total office inventory declined by almost 22,000m² in January to June of 2007, representing the biggest decline in stock levels for over 5 years.
Ongoing solid white-collar employment growth and healthy company profits have sustained demand for office space in the Sydney CBD over the 2nd 1 / 2 of 2007, causing positive net absorption. Driven by this tenant demand and dwindling available space, rental growth has accelerated. The Sydney CBD prime core net face rent increased by 11.6% in the 2nd 50% of 2007, reaching $715 psm per annum. Incentives provided by landlords continue steadily to decrease.
The full total CBD office market absorbed 152,983 sqm of office space throughout the 12 months to July 2007. Demand for A-grade office space was particularly strong with the A-grade off market absorbing 102,472 sqm. The premium office market demand has decreased significantly with a negative absorption of 575 sqm. Compared, a year ago the premium office market was absorbing 109,107 sqm.
With negative net absorption and rising vacancy levels, the Sydney market was struggling for five years between the years 2001 and late 2005, when things began to change, however vacancy remained at a fairly high 9.4% till July 2006. Because of competition from Brisbane, and to an inferior extent Melbourne, it is a huge real struggle for the Sydney market in recent years, but its core strength is now showing the actual outcome with probably the best possible and most soundly based performance indicators since in the beginning in 2001.
The Sydney office market currently recorded the third highest vacancy rate of 5.6 per cent when comparing to other major capital city office markets. The greatest increase in vacancy rates recorded for total office space across Australia was for Adelaide CBD with a small increase of 1.6 per cent from 6.6 per cent. Adelaide also recorded the greatest vacancy rate across all major capital cities of 8.2 per cent.
The city which recorded the best vacancy rate was the Perth commercial market with 0.7 per cent vacancy rate. In terms of sub-lease vacancy, Brisbane and Perth were among the better performing CBDs with a sub-lease vacancy rate of them costing only 0.0 per cent. The vacancy rate could additionally fall further in 2008 whilst the limited offices to be delivered over the following two years come from major office refurbishments which much had been committed to.