While the housing market in Melbourne continues its downturn the office market boom shows no sign of abating.
BIS Oxford Economics forecasts the boom to kick on well into 2024 with prime rents expected to rise another 30-40 per cent over that time.
Office vacancy rates in our CBD are currently sitting at a record-low 3.2 per cent.
Those sorts of lows are not expected to continue however, with the rate expected to rise slightly in 2020 as over 250,000 square metres of new office space is added to the market.
BIS Economics’ Maria Lee spoke to Australian Financial Review about the state of Melbourne’s office market.
“Apart from a brief spike, we’re looking at six years with a sub-5 per cent vacancy rate,” she said.
“That’s unprecedented for Melbourne.”
“Under those conditions the prime CBD market should generate another 30 to 40 per cent growth in rents over the next five years, with values escalating by about 25 per cent.”
Rents and values for Melbourne’s office space have already jumped around 45 per cent from the bottom of the market five years ago.
“We don’t expect Victoria to sustain its recent stellar pace of economic and employment growth over the next couple of years, but there’s another factor at play that will boost net absorption,” Ms Lee told AFR, explaining that pent up demand and new buildings coming on stream was that factor.
“We expect to see robust net absorption through FY2020 and FY2021.”
Venturing further out into Melbourne’s suburbs and things are good there too with the estimated vacancy rate falling to 4.6 per cent and fringe office precincts have experienced rent rises well over 20 per cent in the last year.
