Office market outlook is rosy
The Age
Wednesday November 18, 2009
THE outlook for Melbourne's office market is upbeat, with the city to be a leader as Asia-Pacific region rents grow again, having already resisted the region's big decline in the capital value of offices.Jones Lang LaSalle's latest Asia-Pacific property digest found that Melbourne, Sydney, Hong Kong, Guangzhou and Shanghai were likely to lead the region in returning to positive rental growth. Rentals and capital values for the September quarter were not far from the cyclical trough.Jones Lang LaSalle's Asia-Pacific chief executive, Alastair Hughes, said that except for where there was a large supply pipeline, regional property markets were likely to turn the corner by the end of 2010 and return to their growth trend from 2011 onwards.Speaking in Melbourne, Mr Hughes told BusinessDay the markets were bouncing back due to China's stimulus package and the availability of cheap credit. "This will slowly filter through to renewed commercial property activity. Assuming there are no political blow-ups, we are in the classic lag effect before economic growth picks up," he said.There was a lot of money around €” mainly Asian sovereign wealth funds and high-wealth individuals.Mr Hughes said Melbourne prime office capital values had declined by about 18 per cent year-on-year from the September quarter last year. In comparison, Tokyo capital values had declined by 45 per cent, Mumbai 40 per cent, Singapore 37 per cent and Shanghai 29 per cent, while Hong Kong was the best with 9 per cent. Melbourne office capital values were down by 21 per cent from the peak in late 2007, while London and New York fell closer to 60 per cent, he said.Jones Lang LaSalle's Victorian managing director, Andrew Wood, said Melbourne would become a leader in office rentals due to the strength of the domestic economy, a limited supply pipeline and vacancies below the long-term average.Office vacancy rates would reach a cyclical peak late next year and rental growth in Melbourne and Sydney would stabilise next year and accelerate from 2011, he said.
© 2009 The Age
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