2022-03-30-莱坊-Melbourne_CBD_Office_Market_March_2022_9页_5mb

Melbourne CBD Office Market Summary (March 2022)

Core Content Overview

The Melbourne CBD office market has shown a strong rebound in demand and activity following the easing of lockdown restrictions, despite a rise in vacancy rates due to increased supply. Economic recovery, supported by employment growth and consumer spending, has driven a significant increase in net absorption, particularly in the prime market. However, the market is expected to stabilize and improve over the next few years as new supply slows and demand continues to grow.

Key Market Indicators

• Vacancy Rate: Increased from 10.4% in July 2021 to 11.9% in January 2022.
• Net Absorption: Rose by 45,560 sqm in the second half of 2021, the highest since 2012.
• Prime Net Effective Rents: Fell by 1.6% in the January quarter to $439/sqm, down 7.5% YoY.
• Prime Yields: Remain low, ranging from 4.35% to 4.85%, with a spread of 40 basis points from secondary yields (4.75% to 5.25%).

Economic Recovery and Market Impact

• Economic Growth: Melbourne's GRP is expected to grow by 5.4% in 2022, outperforming the national GDP growth of 3.8%.
• Employment Growth: Victoria's employment rose by 4.5% in the three months to January 2022, higher than the national average of 3.5%.
• Consumer Spending: Retail sales increased by 16.0% since the easing of restrictions, surpassing pre-Delta levels.
• Pandemic Impact: The rebound in office demand suggests a less severe impact than anticipated, with strong activity in prime and premium segments.

Demand Drivers

• Top Sectors: Financial and insurance, professional services, and public administration account for over 92% of CBD office take-up in 2021.
• Major Tenants: Medibank and Bupa are set to lease 10,000+ sqm in 2023 and 2024 respectively, while Aware Super has committed to 8,000 sqm starting in 2023.
• Deal Size Trends: Smaller and medium-sized leasing deals (under 5,000 sqm) now account for 52% of take-up, down from 70% in 2019 and 2020.

Supply and Development

• New Supply: Increased significantly in H2 2021, contributing to higher vacancy rates.
• Development Completions: The six months to January 2022 saw 185,332 sqm of new supply, mostly A-grade.
• Key Projects:
  • 405 Bourke Street (66,000 sqm)
  • 750 Collins Street (38,933 sqm)
• Future Supply: Expected to slow, with 109,795 sqm projected for 2022 and 117,000 sqm for 2023. Larger projects like Melbourne Quarter Tower (68,000 sqm) are anticipated in 2024.

Incentives and Rent Trends

• Incentives: Prime incentives rose to 38% in January 2022, leading to a slight decline in effective rents.
• Future Outlook: Incentives are expected to decline steadily from 2023, with the Eastern Core leading the decline from 35% to 28% by 2026.
• Effective Rent Growth: Prime net effective rents are forecast to rise by 3.6% annually from 2022 to 2026, with the Eastern Core expected to see 4.9% growth and the Western Core 2.8%.

Investment Activity

• Sales Volume: Reached around $2 billion in 2021, similar to 2020 levels but still below pre-pandemic averages.
• Offshore Investors: Accounted for 68% of investment volume in 2021 and 76% over 2020 and 2021.
• Major Transactions:
  • Lendlease sold Melbourne Quarter Tower to South Korea's National Pension Service for $1.2 billion.
  • Forza Capital purchased 399 Lonsdale Street for $86.8 million.
  • Marprop and Futuro Capital acquired 300 Flinders Street for $80.8 million.

Market Outlook

• Vacancy Recovery: Expected to peak at 12.4% mid-2022 before declining to 11.6% by year-end and further to around 9% over the next few years.
• Interest Rates: While nominal rates are expected to rise, real interest rates remain low due to inflation, supporting continued demand for prime office assets.

Contact Information

• Research: Chris Naughtin (chrisnaughtin@auknightfrank.com)
• Office Leasing: Hamish Sutherland (hamish.sutherland@auknightfrank.com)
• Asset Management Services: Ben Veale (ben.veale@auknightfrank.com)
• Capital Markets: Paul Kempton (paul.kempton@au.knightfrank.com)
• Valuations: Michael Schuh (mschuh@vicknightfrankwal.com.au)
• Occupier Services: Gordon Wylie (gordon.wylie@auknightfrank.com)

Disclaimer

This report is for general information only and not to be relied upon for decision-making. Knight Frank Australia Pty Ltd disclaims all liability for any loss or damage resulting from reliance on this document. Reproduction is not permitted without prior written approval.