Trading Spaces
Every 6 months since January 1990, the Property Council of Australia has released its Office Market Report (OMR). It is a consistent and highly anticipated update on the office markets around the country. The OMR release event in Sydney always reminds me of the 1980’s hit movie Trading Places.
At the OMR’s first release, the market was a little different than today. Only 1 of the 6 major cities had a vacancy rate over 10% and that was Perth with a vacancy of 10.4%. By 1993, vacancy had increased to above 20% in Sydney, Melbourne, and Perth. Canberra was enjoying a very low 4.7%, while Adelaide and Brisbane were hovering in the mid-teens.
Total stock for these 6 major cities was just under 11,000,000 m2. Today it sits above 18,000,000 m2. Melbourne and Canberra are the only markets that have increased in size by almost 100% since the statistics started 35 years ago. The others have averaged an increase of 50-60%.
The audience listens intently, and the mood of the room tends to set the tone for the next 3-4 months.
Some of my takeaways from last week’s event are:
- “Green shoots” was the most frequently used term.
- “Flight to quality” was mentioned twice, with one noting it is no longer as relevant. Has it shifted to a “flight to core” or even a “fright from quality” given some of the rents now being asked?
- Economic rents are the current flavour, with every city focused on the next development cycle. It is all about time and cost, and how sharply those costs have risen in recent years.
- “Metrofication” is the latest addition to the lexicon, capturing the anticipated activity in non-CBD markets.
Over the next few weeks, we will provide our views on each of the markets to try and make heads or tails of it all. No doubt the picture will keep shifting as the year unfolds.
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