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Melbourne’s Commercial Real Estate MarketOFFICES350,000 square metres of new prime office space will come on-stream in the next three years. This abundance of supply will certainly impact strongly on vacancy factors, with several new developments already accessible, such as The QV Development, 380 La Trobe Street, 11 Exhibition Street, and 50 Lonsdale Street. The majority of new “A” grade office buildings seem to be starting with at least a 50% pre-commitment rate, which is one way to overcome the oversupply complexities. “B & C” grade buildings could well see their new pool of tenants in to be a dry well, having been already mopped-up by zealous landlords fearful of a market destined at stage to be deemed “in over supply”. A number of the large corporations are decentralising and re-locating to St Kilda Road, Docklands and similar new developments, which will create additional space that, must be absorbed somehow. Major business investment is considered to increase this year, generated by growing business employment. Depending on the magnitude of this factor may well see the potential oversupply eliminated altogether in the short term. Developers are undoubtedly bearish and curtailing construction levels preferring to wait and see take-up rates achieved in current projects before committing to constructing new office space. RETAILThe retail sector should continue to stabilise a throughout the year. Thereby preventing market rents from escalating, resulting in more realistic and sustainable yields. You must appreciate, the retail sector is somewhat similar to the residential and all other commercial markets, in that it always remains sensitive to interest rate fluctuations. Lower interest rates tend to boost consumer spending and, therefore, retailers' turnover and their capacity to pay rental. The leasing market remains buoyant for now, with the current CBD vacancy rate at a robust 1.8%. Interest rates over the next three years hold the key to Melbourne’s retail development rising to a new plateau. INDUSTRIALMelbourne is fast gaining the reputation of becoming the new industrial capital of Australia. New developments in the west are quickly absorbing existing land supplies. Demand emanating from premium grade road transport infrastructure, being accessible from the new freeway and Western Ring road. As a result, pushing rental growth through increased demand and the higher costs of construction. There has been huge demand for more constructed space, which has been produced from upgraded infrastructure and a boom in the automotive and food industries. Long-term construction levels will again expected to be above average, even though the economy is anticipated to re-stabilise this year. After the retail fluctuation of last year, we have noticed that demand for industrial output has risen significantly leading to tenants requiring larger premises, placing pressure on rentals, which, as a result, has made owner occupation a far more attractive alternative. More a real estate sections… |