Adelaide CBD office market static
by: GIUSEPPE TAURIELLO
From: AdelaideNow February 02, 2012 12:00AM
DEMAND for CBD office market remains in a holding pattern, according to a Property Council report.
The Council's Office Market Report, released today, shows a modest tightening of the CBD vacancy rate to 7.7 per cent, following a 0.5 per cent reduction in July, when it stood at 7.8 per cent.
Property Council SA Division executive director Nathan Paine said international economic conditions continued to dampen business and investor confidence.
But he was upbeat about the state's long-term prospects, particularly with an Olympic Dam-inspired boom on the horizon.
"Local businesses are in a holding pattern . . . but there are still signs that people are looking to invest," he said.
"They're not taking up office space right now, but on the flipside there is a significant amount of office stock set to come on-stream over the next two years, and still more mooted. That says a lot about the expectations for economic growth in coming years."
Mr Paine said that on approval of an Olympic Dam expansion, BHP would require an additional 1500 direct employees in the short-to-medium term, requiring around 20,000sq m of additional office space. Add support staff and Mr Paine believes there is reason to be confident.
CBRE director Andrew Bahr said high-quality office space remained in demand, with limited opportunities to occupy large contiguous areas.
"While business confidence remains conservative, the overall market is in a strong position and still in favour of landlords," he said.
Colliers International director Nicholas Shinnick said he was confident the release of 50,000-to-60,000sq m of new and refurbished office space, in late 2012 and early 2013, would be met with the required demand, particularly from tenants seeking less than 3000sq m.
"January has been our strongest tenant enquiry month for some years," he said
Adelaide to experience an increase
in office demand due to expansion
in the mining/resource sector.
Positive white collar employment growth is expected to continue and together with the expected
expansion in the mining / resource sector, demand for office space should remain optimistic.
Further, new supply has been well controlled so the market is not facing a significant oversupply.
As a result, views are positive that the CBD vacancy rate will remain well below the 20 year
historical average over the medium term.
The number of projects being speculatively developed is most likely to rise over the medium term.70 Franklin Street is the first of this kind and construction is now well underway. The office space
component comprises 20,000m² building and is expected to be completed early next year; tenants
have already begun to commit to this space. There remains strong demand for prime quality
accommodation from tenants in the sub 3,000m² however these tenants are not large enough to
anchor one building. Speculative developers may be well positioned to absorb this demand over
the medium term.
Rental growth is forecast over the short term, with higher growth anticipated for A Grade stock.
This grade experienced the largest decline in vacancy during the last six months and of all the
building grades has had five consecutive periods where vacancy has tightened. With enquiry
levels starting to increase, this trend is expected to continue, placing upward pressure on rental
values over the short term. Overall incentives are expected to remain relatively stable.
Investment activity is expected to improve over the coming months as the number of on and off
market opportunities rise. Investor demand remains solid for Prime quality assets with enquiry for
opportunities in the sub $20 million market also increasing. Expect continued interest from foreign
investors during 2012. A further
Olympic Dam fuels demand for office space
by: Giuseppe Tauriello
From: The Advertiser
June 05, 2012 12:00AM
Olympic Dam's expansion plans are likely to fuel demand for office space.
AN additional 75,000sq m of CBD office space will be needed to support an Olympic Dam expansion, a Jones Lang LaSalle report predicts.
The report forecasts that during the first 12 years of the project, from construction through to full production, annual office demand will be heightened by an average of 35 per cent as a direct result of the expansion, peaking in year 12.
"We consider there is most likely to be a spike in office demand much earlier, with demand coming from companies for short-term project space as well as from BHP and its major partners," the report says.
Some 35,000 to 40,000sq m of space will be required during the six-year construction phase, when an additional 1600 metropolitan jobs are anticipated.
A further 40,000sq m is anticipated for the production phase, when metropolitan employment is expected to increase by almost 9000 full-time equivalent jobs.
JLL state managing director Jamie Guerra says the figures are conservative and believes the flow-on effect to other industries will boost office requirements further.
Adelaide acts as the global headquarters for BHP Billiton's uranium division as well as the control centre for Olympic Dam. There has been speculation BHP will either build or buy a new SA headquarters to replace its Grenfell St office.
The company has said it is working toward board approval on Olympic Dam project and will not make any decisions on office needs before the board go-ahead.
Mr Guerra said the extra demand is unlikely to result in major new office development, but will support new supply.
"It will certainly have an effect on the refurbishment stock coming into the market and calm some of the concern that people have with the extra backfill space," he said.
More than 90,000sq m of new and refurbished office space is due to enter the market before the end of next year, including Kyren Group's 19,000sq m project on Franklin St, and the refurbished 13,000sq m former SAPOL building in Flinders St.
The JLL report uses the relationship between gross state product and office space demand to predict future office requirements, adding the impact of the Olympic Dam expansion which is expected to contribute $8.6 billion a year to the state economy when operating at full capacity.
It uses the Brisbane office market as a case study, and the effect of Chevron's $43 million Gorgon LNG project on the Perth office market.
Adelaide developers bank on mining boom
by: Verity Edwards
June 23, 2012 12:00AM
SOUTH Australian developers are hoping Adelaide's CBD will soon profit from the projected mining boom and follow in the footsteps of Perth's increasingly tight office market.
With an office space vacancy of about 7.7 per cent, property analysts say Adelaide's market has reached a balance of demand and supply.
"Overall the health of the CBD market is quite strong, but we haven't seen substantial supply come on stream yet," Property Council of SA executive director Nathan Paine said.
"We've got that supply demand balance right for what we should be, but for longer-term growth we'd want to see demand grow."
Several key developments, including a new Australian tax office building on Franklin Street, providing almost 34,000sq m of office space, a second building, of 20,000sq m, on Franklin Street and a new Bendigo and Adelaide Bank building on Grenfell Street, will be completed either later this year or early next year. Early this year, South Australian Police moved into a new 13,500sq m building.
With each of the organisations having moved or preparing to, Mr Paine said there would be openings in the market.
The South Australian commercial property industry is pinning its future growth expectations squarely on the shoulders of BHP Billiton, optimistic that its planned Olympic Dam expansion will create a need for office space for the mining giant and related engineering industries.
A Jones Lang LaSalle white paper on the impact the Olympic Dam expansion would have on Adelaide CBD office space found demand would increase by 35 per cent over the first 12 years of the project.
The white paper, which referred to BHP's environmental impact statement, notes the company alone would need an additional 75,000sq m of office space. That could include BHP bringing its uranium headquarters to Adelaide, but does not include associated engineering company needs.
BHP has until the end of the year to make a commitment to the expansion and chief executive Marius Kloppers has warned that global economic uncertainty could have an impact on plans.
Mr Paine said whether BHP Billiton went ahead with its Olympic Dam expansion plans or not, he hoped growth in the state's mining sector would still create demand in the office market.
"What we've seen so far is some of the engineering companies in particular bringing in staff from interstate," he said. "It's not just Olympic Dam, there's $8 billion worth of mining development going on. They're tooling up for these projects."
He said the Olympic Dam projections could see new buildings being developed, and a further tightening of the vacancy rate from associated companies.
Colliers International chief executive James Young said there was room for growth in Adelaide, particularly with the relaxation of height limits and available development sites.
But he said that, at the moment, there was little need for rapid expansion in the commercial market, because employment growth was steady and there would soon be several vacated sites needing backfilling. "A lot of people have been spooked that this additional office space (from the ATO, the police and the bank moves) will create too much space and there will be blood on the streets," Mr Young said. "But it will be more like a musical chairs situation."
He said with low vacancy rates, prime rents were at an all-time high, plateauing at about $550 per square metre gross.
Mr Young said that figure would average about $500 per square metre for the prime market in the city's core, and $450 in other parts of the CBD. Based on an estimated 3.5 per cent growth, Colliers conservatively anticipates prime rents will grow to about $590 within two years.
While those figures were quite low compared with $800 in Perth, where vacancies sit at about 2 per cent -- or $1000 per square metre in Sydney's core CBD -- he said Adelaide's rents could be compared with other city fringe sites.
"We'd be on par with Melbourne's Docklands, but not Collins Street," he said.
"We might be on par with something like Surry Hills, but not Pitt Street in Sydney."
And while the relaxation of height limits might encourage development, Mr Young said the positive impact would be felt more keenly in the residential apartment market, rather than prime office space. "Residential developers are only limited by their vision, their balance sheet and their clients," he said.
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