Economic Rents
With a series of school breaks and public holidays starting next week, we look back at the first quarter and the office markets. The release of office market figures in January and February set the tone for the start of the year.
Overall national office market vacancy increased, national CBD vacancy increased, and national non-CBD vacancy stayed the same.
Adelaide, Perth, and Canberra CBD vacancies decreased. Sydney and Brisbane CBD vacancies increased. Meanwhile, Melbourne CBD remained the same.
The conversation was focused on supply and that is because demand is still not looking good. Only Adelaide and Canberra have returned to pre-covid demand levels, based on average 6 month absorption in the 10 periods prior to Jan 2020, and the 10 periods since.
The supply focus naturally starts the conversations on economic rents. Our view on economic rents for each of the capitals is;
Brisbane – the biggest gap between current and economic rents and something is going to have to give because the gap is too big
Sydney – someone will always pay over the odds for the best view in the world, except we are now running out of those views
Melbourne – not a good time to be thinking about more supply and hence not as much a conversation
Canberra – the natural move from the suburbs to the CBD is continuing and hence a real conversation
Perth – moves in a regular cycle and hence it is a constant and predictable conversation
Adelaide – not on the institutional radar, therefore it is a constant and local conversation
Let’s see what everyone starts talking about after the break.
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