Capital cities defy global weakness
- From: The Australian
- September 29, 2011
A number of tenants need large tracts of office space in Brisbane and large leasing transactions are close to being finalised, according to CB Richard Ellis Picture: Lyndon Mechielsen Source: The Australian
AUSTRALIA'S capital city office leasing markets are defying the weak global economic sentiment with more than 100,000sq m of space being sought by large tenants.
The exception is Sydney, with analysts saying businesses remain cautious, taking longer to complete deals in the Australian hub for global financial groups.CB Richard Ellis office services director in Brisbane, Campbell Tait, said a number of tenants needed large tracts of office space in Brisbane and large leasing transactions were close to being finalised.
"It is going to be an interesting six to eight weeks and will change the dynamics of our markets," Mr Tait said.
"There are a lot of big transactions that are close."
Developers that had missed out on Suncorp's requirement for 30,000sq m in Brisbane would probably target the Bank of Queensland for a pre-commitment deal. The bank is looking for between 12,000sq m and 14,000sq m of space in the Queensland capital.
Market sources said Brazilian miner Vale, which is searching for 10,000sq m of office space, may occupy floors in the Eagle Street tower.
It was unclear whether the Queensland government's Department of Transport and Main Roads would finalise a deal at the 313 Adelaide Street office tower owned by Brisbane's Pidgeon family, where about 6000sq m is believed to be available.
The department had been in negotiations with the landlord for some time, but it may recently have decided not to proceed with the deal, according to industry sources.
The rent being paid on the building is likely to be between $550 and $580 a square metre, with an incentive of more than 30 per cent, according to sources.
The resources sector was driving demand in Brisbane, where vacancies had almost halved in the past year to 7.4 per cent -- the lowest level since January 2009, according to the Property Council of Australia.
In Sydney, leasing activity was far more subdued.
Sources said insurer QBE was looking for 14,000sq m of additional space to consolidate its operations in the city.
However, not many other groups are looking to expand.
Director at tenant representative LPC Australia, David Fenech, confirmed the tentative sentiment.
"What I can say is that our clients are being cautious and are certainly concerned about the cost of premises," Mr Fenech said.
"Our overseas-based clients are taking a lot longer to have deals approved, but there are still deals being done," Mr Fenech added.
He said there had been reports about rent increases and incentive tightening by Sydney landlords as a result of stronger demand.
"We are certainly not seeing this being reflected in the offers being put to clients," he said.
In Melbourne, Westpac has been named as the anchor tenant at the Collins Street development by Grocon and APN Property Group, while Medibank is looking for about 30,000sq m of space.
Jones Lang LaSalle's Australian head of leasing, Kevin George, said big tenants in Melbourne were still making decisions about their office needs despite fluctuations in the economy.
Smaller tenants were not as eager to expand or move.
"Melbourne still seems to be reasonably resilient," he said.
"To say there isn't more caution in the air wouldn't be right, but there is not a slowing of momentum to any great extent."
In Perth, engineering firm AMEC is understood to be leasing 7500sq m of space at GDI Property Group's recently purchased office tower at 197 St Georges Terrace, known as the Governor Stirling Tower. Buildings of similar A-grade quality in the precinct typically achieve rents of $600-$750 per square metre, according to a source.
CBI Constructors was close to signing a deal to take more than 1000sq m of space at 251 St Georges Terrace, a building purchased by Primewest for $60 million in a receivership sale.
Mining giant BHP Billiton has also signed numerous short-term leases around the city.
Jones Lang LaSalle's national director of leasing in Perth, David Evans, said the demand in the market was strong.
Landlords were in the market to obtain precommitments for new buildings, he said.
Brookfield Multiplex had a development site for an office tower at City Square South. And Leighton Holdings was trying to secure a pre-commitment on the Perth Entertainment Centre site, where it was planning to construct 40,000sq m of office space.
At 999 Hay Street, developer Cube is seeking a tenant to pre-commit to about 12,000sq m.
"We are certainly not seeing this being reflected in the offers being put to clients," he said.
In Melbourne, Westpac has been named as the anchor tenant at the Collins Street development by Grocon and APN Property Group, while Medibank is looking for about 30,000sq m of space.
Jones Lang LaSalle's Australian head of leasing, Kevin George, said big tenants in Melbourne were still making decisions about their office needs despite fluctuations in the economy.
Smaller tenants were not as eager to expand or move.
"Melbourne still seems to be reasonably resilient," he said.
"To say there isn't more caution in the air wouldn't be right, but there is not a slowing of momentum to any great extent."
In Perth, engineering firm AMEC is understood to be leasing 7500sq m of space at GDI Property Group's recently purchased office tower at 197 St Georges Terrace, known as the Governor Stirling Tower. Buildings of similar A-grade quality in the precinct typically achieve rents of $600-$750 per square metre, according to a source.
CBI Constructors was close to signing a deal to take more than 1000sq m of space at 251 St Georges Terrace, a building purchased by Primewest for $60 million in a receivership sale.
Mining giant BHP Billiton has also signed numerous short-term leases around the city.
Jones Lang LaSalle's national director of leasing in Perth, David Evans, said the demand in the market was strong.
Landlords were in the market to obtain precommitments for new buildings, he said.
Brookfield Multiplex had a development site for an office tower at City Square South. And Leighton Holdings was trying to secure a pre-commitment on the Perth Entertainment Centre site, where it was planning to construct 40,000sq m of office space.
At 999 Hay Street, developer Cube is seeking a tenant to pre-commit to about 12,000sq m.
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