I’ve been wondering for some time about the strange divergence in the national office market between rocketing vacancy rates and still reasonable pipelines of development. I’ve put it down mostly to the distortions of financial repression in which returns play second fiddle to credit and capital gains. Today we have a pointed warning directed at Sydney, which is the strongest of national office markets. From the AFR says Geoffrey Learmonth, a director of tenancy advisory LPC Australia:
“The landlord fraternity is kidding themselves if they don’t think there is a ticking time bomb just around the corner,” Learmonth says.
…The commentary from Australian office property trusts out of the half-year reporting season in February is that there are “green shoots” in the office sector.
Landlords said there are signs of improving enquiry and demand from tenants. The overwhelming consensus was that Sydney would lead the recovery and is now passing through the trough.
The maths does not add up, says Learmonth. “Right now 9 per cent of Sydney’s office market is available for rent, that means there is about 450,000 square metres vacant,” he says.
“The historic net absorption per year, according to 30 years’ worth of Property Council of Australia figures, is about 60,000 square metres. If you divide the existing supply by that number we are looking at more than 7 years until that space is filled.”
Over the next few years, developments such as Barangaroo, 5 Martin Place, 200 George Street and 20 Martin Place will add an additional 365,000 square metres of office space.
That’s nine years worth of office space in 2015/16 available for let. And remember that Sydney is the best market. Financial repression: bringing you bargains day by day!
