2021-09-14-莱坊-Melbourne_CBD_Office_Market_September_2021_9页_6mb

Summary of Melbourne CBD Office Market Report, September 2021

Core Content

The Melbourne CBD office market has shown resilience despite the ongoing impact of the COVID-19 pandemic and continued lockdowns. While demand for office space has been subdued, key indicators such as rents and yields suggest a gradual recovery is expected as Victoria's economy and vaccination rates improve.

Main Points

• Market Resilience: Despite repeated lockdowns and rising vacancy rates, rents have remained stable and yields have compressed.
• Vacancy Increase: CBD office vacancy rose from 8.4% in January 2021 to 10.4% in July 2021, surpassing the 10-year average of 6.6% and reaching the highest level since 2000.
• Sub-lease Vacancy: Sub-lease vacancy almost doubled over the last six months, reaching 119,717 sqm in July 2021, the highest since 1994.
• Sector Demand: Finance and insurance services, public administration, and professional services have driven the majority of leasing activity, accounting for 87% of all deals in the first half of 2021.
• Net Effective Rents: Net effective rents have declined due to rising incentives, with prime net effective rents averaging $448/sqm in July 2021, down from $462/sqm in January 2021.
• Vaccination and Recovery: With the accelerated vaccination program, there is an expectation of easing restrictions, which should support a rebound in business confidence and office market activity.
• Development Pipeline: A significant amount of new supply is expected in H2 2021 and 2022, which may keep vacancy rates elevated in the short to medium term. However, a reduction in new supply from 2022 onwards is anticipated to aid market recovery.
• Sales Activity: Sales volume in H1 2021 was low, but the Lendlease sale of Melbourne Quarter Tower for $1.2 billion indicates strong offshore demand and a potential rebound in sales activity.
• Yield Compression: Prime office yields have compressed, currently ranging from 4.35% to 4.85%, with secondary yields ranging from 4.85% to 5.35%. This compression is expected to continue as leasing market sentiment improves.
• Tenant Commitments: Major tenant commitments in the CBD include Medibank, BUPA, Afterpay, and Northern Trust, indicating ongoing interest in the market despite the challenges posed by the pandemic.

Key Data

Outlook

• Net Effective Rents: Expected to bottom out by the end of 2021, with incentives peaking and then gradually declining in 2022.
• Economic Recovery: Positive business confidence and the potential for easing restrictions due to increased vaccination rates are seen as catalysts for a market recovery.
• Office Design Trends: Landlords and developers are incorporating health and hygiene-focused design elements into new and refurbished office spaces to meet post-pandemic tenant needs.
• Offshore Demand: Strong interest from foreign investors, particularly from Singapore, South Korea, and the USA, is expected to continue to support the CBD office market.

Conclusion

The Melbourne CBD office market is showing signs of resilience amid the challenges of the pandemic. While vacancy rates have increased and net effective rents have declined, the market is poised for recovery in 2022, supported by a growing vaccination rate, improved economic conditions, and strong offshore demand. The focus on health and wellness in office design is expected to play a key role in future tenant preferences and market dynamics.