2018 Office Market Wrap / Australia & Singapore

December 12, 2018 | Commercial Real Estate

Another calendar year is almost over, how time flies! Let’s review what’s happened during 2018 in office markets across Australia and Singapore, including key trends.  

 

Sydney

Rental rates for A-Grade office premises in the Sydney CBD have increased by just under 8% over the past year. They remain, by far, the most expensive rates in Australia. Incentives are also comparatively low, averaging about 18%. You can expect to pay around $1,065 per square metre.

Vacancy rates in the CBD sit between 4 and 5%. That’s well below the national average of just over 9%, so demand is still strong. Office stock levels have also dropped slightly in Sydney over the past year, which hasn’t helped the situation.

A-Grade office space in North Sydney and Parramatta have experienced double-digit rent increases over the past twelve months, though their average rates are far cheaper than you’ll find in the CBD. You can expect to pay around $840 per square metre in North Sydney and about $545 in Parramatta. Macquarie Park is cheaper again at about $370 per square metre.

Image of Sydney Harbour from the window of a plane | 2018 Market Wrap Article

Trends in the Sydney market

While office rental rates in Sydney are generally high, there are some encouraging trends for tenants  over the short-to-medium term, including:

  • A looming increase in stock, with nearly $8 billion worth of commercial real estate projects either under construction or scheduled to commence in the near future.
  • An increasing demand for co-working spaces with shorter-term, more flexible lease arrangements.

Read more about the Sydney and Parramatta office markets.

Melbourne

Office rental rates in the Melbourne CBD have gone up by about 9% over the past year, but they’re still a lot cheaper than comparable space in Sydney. These spaces also generally come with higher incentives.

Rates for Melbourne A-Grade suites in the city centre average about $580 per square metre. This rate is only slightly higher than what’s on offer for similar space in both the Perth and Brisbane CBD markets at the moment.

Vacancy rates for office space in the Melbourne CBD have continued to remain low in 2018 at between 3 and 4%. Stock levels have also remained fairly stable.

On the city fringe, office rents in St Kilda have risen by more than 15% in the past twelve months off the back of low stock levels. Nevertheless, they’re still very affordable, averaging about $435 per square metre.

Image of Melbourne skyscrapers at sunset | 2018 Market Wrap Article

Trends in the Melbourne market

Melbourne is leading the charge to coworking premises nationally. It has the largest concentration of coworking spaces in Australia.

Read more about the Melbourne market here.

Brisbane

Rental rates have remained flat for both Brisbane CBD and inner-city A-Grade premises during the past year, but incentive levels have kept up. CBD rates are currently about $540 per square metre after incentives, and about a hundred dollars cheaper on the city fringe.

Vacancy rates for both areas are about 14%, which is well over the national 9% CBD average. These rates place Brisbane office tenants in a strong bargaining position when negotiating lease arrangements.

There’s been a slight drop in Brisbane office stock over the last year.

Image of people enjoying a pool in Brisbane | 2018 Market Wrap Article

Trends in the Brisbane market

Good news – it’s likely to remain a tenants’ market with the amount of supply available. So, it may be a great time for tenants to think about upgrading their space or renegotiating their lease to ensure it meets market rates.

Read more about the Brisbane market here.

Perth

Perth is another market where office rent rates have stayed flat over the past year and incentive levels have remained very high. Average rates for A-Grade CBD office space after incentives are about $560 per square metre, making them fairly comparable to what you’ll pay in both the Melbourne and Brisbane markets.

Perth’s vacancy rate is also high at just under 20% in the CBD, which is more than double the national CBD average. Tenants should certainly take advantage of this situation at the negotiating table.

Image of a river and skyscrapers in Perth | 2018 Market Wrap Article

Trends in the Perth market

Like Brisbane, Perth should continue to be a tenants’ market for the foreseeable future. Incentive levels on offer are currently the highest in Australia at 49%!

Read more about the Perth market here.

Adelaide

Along with Canberra, Adelaide currently has the cheapest rental rates you’ll find among Australia’s major capital cities. Expect to pay a net rent of about $370 in the CBD and about $340 in the city fringe.

Rates in the CBD have dropped by nearly 20% over the past year off the back of an increase in incentives.

Vacancy rates are running at around 14% in the CBD and at about 11% on the fringe.

Trends in the Adelaide market

Like Brisbane and Perth, it’s a tenants’ market both now and into the foreseeable future.

Read more about the Adelaide market here.

Canberra

Rent rates after incentives of $370 in the Canberra CBD are on a par with those in Adelaide. Rates have remained fairly flat over the past year.

Vacancy rates between the two cities are similar, but the level of incentives being offered in the nation’s capital is much lower.

Trends in the Canberra market

The vacancy levels in Canberra’s older office spaces are increasing significantly. These buildings are likely to either need major refurbishment or will be knocked down and rebuilt to attract tenants.

Singapore

A-Grade CBD rent rates in the Singapore CBD have increased by more than 4% over the past year and are now about $10 per square foot per month. Factors that have contributed to this increase include:

  • both the Singapore economy and employment levels, which are going from strength to strength, especially in white-collar industries like finance, insurance and information/communications technology.
  • supply levels remaining flat over the past year.

Image of skyscrapers in Singapore | 2018 Market Wrap Article

Trends in the Singapore market

Office rents in Singapore are likely to continue their upward trajectory until at least 2022 when we can expect the next major injection of new stock.

There is also a strong demand for co-working spaces in Singapore and this trend is likely to continue into the foreseeable future.

How we can help you

At Tenant CS, we provide an independent tenant representation service to commercial tenants.  We help our clients source the perfect office space for their needs and negotiate the best possible lease terms and conditions.

We work for tenants, not for landlords or real estate agents.

We have offices in Sydney and Singapore and are part of a global network of tenant advisors, which means we can service clients around the world!

Contact our team today to find out how we can help you!

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