Colliers predicts record sales in Melbourne office market

Melbourne office market

According to Colliers International forecast, Melbourne metropolitan office market will hit another record in 2019. About AUD1.08billion worth of officer sales were recorded in 2018.

Colliers International’s Peter Bremner, National Director of Metro Sales, said just over $500million of office buildings sold in 18 deals. This was followed by the Outer East region, where $300million of office stock sold across 14 deals.

“We predict another $1billion-plus year in 2019 as buyers see value in the strong fundamentals of the Melbourne metro office market, as leasing conditions continue to turn in favour of lessors and rents continue to rise and incentives decrease across most regions,” Mr Bremner said.

“Whilst yields may not decline like they have in previous years, capital growth is still expected due to these favourable leasing conditions.

“Pre-commitment and speculative office construction will rise as residential development sites are converted back to commercial as the highest and best use.”

Melbourne office market vacancy rate

Melbourne’s metropolitan office market comprises 3.23million sqm in NLA and has a current vacancy of 5.24% overall.

Mr Bremner said the hottest markets to watch in 2019 would continue to be those city fringe suburbs within the 3-5km ring around the CBD, including South Melbourne, Kensington, Fitzroy, East Melbourne, Abbotsford, Collingwood, Richmond and Cremorne.

The largest deal of 2018 was the sale of 60 Brougham Street in Geelong for $115.25million. The office building was 100% occupied by TAC and purchased by Centuria for a passing yield of circa 6.90%.

This was followed by the sale of 21 Harcourt Parade, Cremorne, an office building that was pre-committed by MYOB and sold by Colliers International as a fund-through transaction to AXA for $100.1million, reflecting a yield of 5.40%.

452 Johnston Street in Abbotsford transacted for $93.5million at the start of 2018, with Abacus Property Group purchasing the Computershare headquarters on a yield of 5.85%.

Private investors accounted for 51% of metropolitan office sales in 2018 (or 22 deals), following by owner-occupiers at 21% (nine deals).

This was followed by insitutions at 12% of total transactions (five deals), offshore buyers at 9% (four deals), syndicates at 5% (two deals) and just one sale to a developer (2% of total transactions).

SEE ALSO : Australian office vacancy rates drop across the country