Melbourne’s office market outperformed the rest of the country over the third quarter of this year with a rapid decline in incentives, strong effective rental growth and tightening vacancy, according to CBRE research.
Incentive declines accelerated across all of Australia’s southeast CBD office markets, driving effective rental growth during the quarter, but Melbourne’s prime incentives fell the most by 180 basis points.
Sydney’s dropped by 160 basis points, CBRE’s associate research director Felice Spark said.
The sharp acceleration in the decline of incentives was a key indicator of tightening vacancy and a shift towards a landlord’s market, she said.
“While the other major Australian markets have either remained stable or witnessed some nominal softening, both Sydney and Melbourne have demonstrated an increase in demand and a fall in vacancy which has been a predominant driver of
effective rental growth,” Ms Spark said.
Office leasing director Andrew Tracey said rental growth was expected to soften when Melbourne’s next development cycle kicked in after 2021 but net absorption and demand would remain strong through to that time.
“All of the space due for completion in Melbourne in 2018 is pre-committed, and over 50 per cent of the space due in 2019-2020 is already pre-leased – signalling the market will experience significant positive net absorption during this period,” Mr Tracey said.