The city fringe office market continues to perform very well from a leasing and sales perspective. There has been six years of positive net absorption of office space and continued steady employment growth which augurs well for the inner suburban office markets. Major companies are focussed on attracting and keeping quality staff and this has resulted in a move to vibrant, well public transported suburbs like Richmond.
With no new office supply and the CBD office vacancy rate predicted to decrease further, city fringe office rents are predicted to increase with prime properties anticipated to outperform.
The investment market has started the year on a very strong note. Frasers (previously Australand) has sold Building 10 in the Richmond Corporate Park to an overseas investor BlackRock for $45.5m.The sale price reflected a tight yield of 7.21% and a capital value of $5,761/m2. This is the largest office investment sale in Richmond for over 12 months. It is situated in an inferior location to our buildings.
The leasing market continues to be very strong with limited supply in the Richmond/Cremorne precinct. Bauer Media recently leased 823m2 for 5 years on the ground floor of Building 8 in the estate. The rental rate was $365/m2 with a low incentive of 12% which is excellent news for our building.
Real Estate Fundamentals are Strong – Tim Church UBS, Head of Real Estate Australasia
1) Interest rates and the A$ have been supportive for Real Estate Valuations
2) And the outlook remain “lower for longer”
3) Real estate remains one of the highest yield asset classes
4) While volatility is the new normal in global equity and commodity markets the relatively stable real estate has been the beneficiary of the flight to safe asset classes
5) Over the next 20 years, a further A$380 billion of demand for real estate investments will come from Australian superannuation