In our latest release of Investa Inside we provide insights on the impact of recent economic developments and market trends on the outlook for conditions across Australia’s major office markets:
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Business conditions, net absorption and supply. The business services economy has remained an outperformer, with continued white-collar employment growth and increased business services activity supporting a positive outlook for leasing demand across Australia’s major capital city office markets.
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Leasing market conditions to converge. While new office supply has been scarce across Australia’s major capital cities in recent years, the tide of supply is turning. Development of new office supply in both Sydney and Melbourne will ease vacancy and conditions from the current cyclical lows, while Australia’s other major capitals will continue to improve on a subdued supply outlook.
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Cap rates to remain lower for even longer. We expect that the factors which have driven strong office capital market activity over the past year will remain in play for some time yet. In particular, a positive ‘through the cycle’ outlook for Australia’s major capital city office leasing markets will support solid long-term total returns and maintain downward pressure on Australian office cap rates.