Office Demand Still Weak, Occupiers Return To Cbd Markets

Issued by: Property Council of Australia

*** Embargo: not for publication or broadcast before 1am, Thursday 4/2/2010 ***

Office demand still weak,
occupiers return to CBD markets


Weak tenant demand has pushed the vacancy rate in Australia's office market to its highest
point in five years, according to the Property Council's latest Office Market Report.

The report shows vacancy in Australia's office market increased from 8.3 percent to 9.3 percent
in the half-year to January 2010, the highest since January 2005.

Property Council CEO Peter Verwer says additional new supply played a part in the vacancy
increase, but net absorption - the best indicator of tenant demand for office space - was
extremely low for the period.

"More than 387,000sqm of office space was added to the Australian market in the six months to
January 2010, one-third more than the historic average," Mr Verwer says.

"But the big issue facing the market is continuing weak demand. While our research shows an
encouraging swing toward positive tenant demand in the past six months, it is just 1/20th of the
historic average."

Office Market Report data shows net absorption for Australian office markets for the period was
just 11,452sqm. While this figure is a significant shift against the -160,000sqm result recorded
over the first half of 2009, it is still far from the historic average of 197,565sqm.

The report has identified the re-emergence of Australia's CBD markets as a dominant force.
Vacancy for the CBD market increased from 7.3 percent to 8.0 percent for the period. All but
one of the capital city CBD markets remains below 10 percent vacancy.

However, vacancy in the non-CBD market increased from 10.3 percent to 12.1 percent, the
highest vacancy rate in this market in almost 15 years. Net absorption was -56,550sqm for the
period, the lowest on record and the second consecutive negative result. Two-thirds of the 18
suburban markets tracked by the Office Market Report have recorded vacancy rates of more
than 10 percent.

"There is no doubt Australia's suburban markets suffered a body blow over the last half of
2009," Mr Verwer says.

"Business confidence in the finance sector, one of the key occupiers of office space, is on the
rise. CBD space is increasingly affordable, and is attracting tenants from the suburbs."

(more) ...





The Voice of Leadership
LEVEL 1 PROPERTY COUNCIL OF AUSTRALIA HOUSE 11 BARRACK STREET SYDNEY NSW 2000
PH 02 9033 1900 - FAX 02 9033 1966 - ABN 13 008 474 422
Email [email protected] - www.propertyoz.com.au



(cont'd) ...



"While the swing in demand and the re-emergence of the CBD markets is encouraging, the
prospect of new supply clouds the horizon," Mr Verwer says.

"A total of 968,600sqm of new supply is due to be added to Australia's office market in 2010. In
the first half of the year alone more than 760,000sqm will be introduced, the biggest addition of
stock in one period on record. The historic half-yearly average is 284,124sqm."

"Three-quarters of the stock to be added over 2010 will find its way to the CBD market,
with only 58 percent pre-commitment."

"However, the 2010 supply spike will be short-lived and there is no evidence of a looming
vacancy blow-out such as that of the early 1990s, which followed a supply tsunami delivered
over several years."



For more information, contact:

Peter Verwer
Chief Executive - Property Council of Australia
Ph: 02 9033 1926, 0407 463 842


[more analysis and data following]

CBD markets:

Vacancy for the total Australian CBD office market increased from 7.3 percent to 8.0
percent. This is the highest since January 2005

All CBD office markets covered by the survey experienced vacancy increases over the
6 months to January 2010, with the exception of Canberra

By vacancy, the top 3 CBD markets are Hobart (3.7 percent), Adelaide (6.1 percent)
and Melbourne (6.6 percent)

Net absorption was 68,002sqm, less than the 15-year historic average of 113,833sqm

Over the 12 months to January 2009, the Brisbane CBD posted the highest demand
rate of all CBD markets surveyed of 2.1 percent. The demand rate is the amount of
space absorbed relative to the size of the market

A total of 284,936sqm of stock was added to CBD markets over the period. The 15-year
historic average is 200,294sqm

100,190sqm of space was withdrawn from the market. The 15-year average is
127,914sqm





The Voice of Leadership
LEVEL 1 PROPERTY COUNCIL OF AUSTRALIA HOUSE 11 BARRACK STREET SYDNEY NSW 2000
PH 02 9033 1900 - FAX 02 9033 1966 - ABN 13 008 474 422
Email [email protected] - www.propertyoz.com.au




Non-CBD markets:

Vacancy for the total Australian non-CBD market increased from 10.3 percent to 12.1
percent, the highest in almost 15 years

Net absorption was -56,550sqm, the lowest on record

102,620sqm of stock was added to non-CBD markets over the period, slightly more
than the 15-year average of 83,830sqm

18,055sqm of stock was withdrawn over the period, around half the 15-year average

By vacancy, the top 3 non-CBD markets are Adelaide Fringe (3.4 percent), East
Melbourne (3.6 percent) and West Perth (6.1 percent)

12 of the 18 non-CBD markets surveyed have vacancy rates above 10 percent

Future supply - total:

A total of 968,613sqm of stock is due to be added in 2010. The 15-year average is
556,530sqm

In 2011 a further 320,317sqm is due to come on-line around Australia, followed by
232,037sqm in 2012+

A total of 1,029,930sqm is mooted

Future supply - CBD markets:

A total of 720,149sqm of stock is due to be added to CBD markets in 2010. The 15-year
average is 394,238sqm

In 2011 a further 286,073sqm is due to come on-line, followed by 232,037sqm in 2012+

A total of 588,646sqm is mooted

Future supply - non-CBD markets:

A total of 248,464sqm of stock is due to be added to non-CBD markets in 2010. The 15-
year average is 162,291sqm

In 2011 a further 34,244sqm is due to come on-line

A total of 441,284sqm is mooted





The Voice of Leadership
LEVEL 1 PROPERTY COUNCIL OF AUSTRALIA HOUSE 11 BARRACK STREET SYDNEY NSW 2000
PH 02 9033 1900 - FAX 02 9033 1966 - ABN 13 008 474 422
Email [email protected] - www.propertyoz.com.au