Commercial & Industrial Property News Update

Melbourne - Office Occupancy Cost To Remain Low In Melbourne

July 24, 2012

Several factors will contribute to Melbourne's competitive status as a low-cost city offering world-class facilities.

The latest office ranking report by CBRE found that Australian cities fared moderately well in terms of office occupancy costs in the Asia Pacific. With only 15th-ranked Sydney in the top 20, Australian cities offered relatively cheaper office spaces compared to the rest of the region.

After Sydney, with an occupancy cost of USD 117.88 per sq ft, the other ranked Australasian cities were Perth (24th position, USD 93.63); Brisbane (31st, USD 77.85); Melbourne (53rd, USD 60.72); Adelaide (72nd, USD 49.17); Auckland (75th, USD 48.87); Canberra (94th, USD 40.03) and Wellington (100th, USD 39.20).

According to CBRE senior director, office services, Chas Keogh, Melbourne was likely to remain a cheaper office location compared to Sydney, Perth and Brisbane in the short to medium term.

He said that there were several factors sponsoring the trend, including the amount of development sites within the CBD, Docklands and Southbank precincts.

Keogh also noted that occupancy costs in Perth and Brisbane were being driven by the resources sector, while Melbourne was home to many government and corporate tenants that were shedding staff.

"A large quantum of sublease vacancy is also expected to hit the Melbourne market in the second half of the year, which would keep a lid on previously forecasted rental growth," he added.

However, due to a large disparity between office rents in Sydney and Melbourne, stronger rent growth is expected on the back of improved tenant demand.

In the report, CBRE tracked occupancy costs for prime office space in 133 markets around the globe. Of the 50 "most expensive" markets, 19 are in the Asia Pacific region, 19 are in Europe and the Middle East and 12 in the Americas. The firm also found that Asia Pacific had the strongest growth in occupancy, with costs in Beijing's Jianguomen-CBD rising 49.4% over the past year.

CBRE's global chief economist, Raymond Torto, said the most expensive office locales were increasingly in dynamic markets in the emerging economies.

Tags: Office space for rent, commercial units, Australia

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