With business sentiment strengthening, Australia’s office market is primed for change. Property Australia asked industry experts for their views on what the future holds.
Who currently holds the balance of power between tenants and landlords?
Melbourne is currently rather balanced and, maybe slightly, landlords have the upper hand for big space. In Sydney, landlords like to believe that that market is changing in their favour but, with some great deals still to be had, their enthusiasm is somewhat premature. In Brisbane, Adelaide and Canberra the upper hand is with tenants and is likely to be for some time to come.
Where are incentives heading over the short to medium term?
Although incentives may start reducing towards the middle of 2011, it will be longer before face rentals start to firm. Melbourne is probably ahead of the curve compared to other capital cities.
Are we entering a period of oversupply or undersupply?
There is an increased amount of refurbished space with improved environmental ratings coming on the market. There are generally no big swings or changes to supply during 2011. As a result, larger tenants seeking 5000sqm+ will struggle to find contiguous space in good, large floorplate buildings. Tenants with smaller requirements will have a greater number of options available to choose from.
What is your reading current business sentiment?
Generally, business sentiment in typical office tenants is improving, but there is still nervousness about over-committing to large space on long leases. However there is a marked difference with international firms, particularly USA-based, who are more cautious than local firms. Re-negotiating for short-term extensions appears to be the preferred option.
Is technology likely to make a big impact on office design or demand over the short to medium term?
The big difference has already occurred for those companies that are able to embrace alternative work practices. So, in the short to medium term, there is probably not going to be a significant impact on demand. Technology will continue to change how we work but we are probably in a consolidation stage with the adoption of new technology where improvements to existing technology will occur before new technologies (whatever they are) are likely to drive greater change in workplace practices and the demand for office accommodation.
