Oversupply bites Brisbane and Melbourne
Investors should be concerned about the Melbourne and Brisbane office markets in 2003 as potential oversupply of space bites, warns CB Richard Ellis head of research Kevin Stanley.
The driver for this concern will be white-collar employment which is expected to drop by about 120,000 jobs in 2001. Victoria's white-collar job growth is expected to be about 1 per cent in 2001 with a rise to only 2 per cent by 2005.
In Queensland, white-collar job growth will fall in 2 per cent in 2001 and remain static for the next five years.
Flat job growth will also affect New South Wales and Western Australia for the next five years, with employment in both states remaining at the 2 per cent level during this period.
"In some states, demand for office space will be driven by the new industries such as tech companies," Stanley says.
While the future of the office sector looks subdued, rental growth in the last quarter of 2000 proved there is pent-up growth in some capital cities.
Melbourne rents soared 76 per cent in the last quarter while Sydney recorded only 7.1 per cent growth. The other star performer was the ACT, with 27.9 per cent growth.
Demand outstripped supply in Melbourne and a number of new projects are on-line. The most notable future move is the decision by BHP to move to a proposed new Grollo development at the former Queen Victoria Hospital site. It will eventually vacate its existing Bourke Street headquarters, which is an AMP investment.
"In Sydney there is no demand, but offices are available and that has affected rental growth," says Stanley.
In 2001, he sees tenant demand easing which will push yields for the sector down, although vacancy rates in most cities are already low and in some cases falling.
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