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Office space demand increased across major Australian markets in first quarter
Demand for office space across major Australian markets is on the rise in 2016, according to new data from Colliers International. According to the firm’s latest Office Demand Index, a total of 507,799 square meters of demand was recorded in the first quarter of 2016, a 33% increase from the fourth quarter of 2015. Large businesses looking for more than 3,000 square meters of office space accounted for over 50% of the total area enquired for in the first three months of 2016, while representing just 9% of the total number of enquiries, by volume. Small businesses looking for 1,000 square meters or less accounted for almost 80% of the total number of enquiries recorded in the first quarter this year. ‘We have found that compared to this time last year, on average, businesses are enquiring for more space,’ said Simon Hunt, Colliers International managing director of office leasing. ‘On a national level, the average area enquired for as of the first quarter of 2015 was about 888 square meters. In the first quarter of 2016 it increased to 1,050 square meters,’ he added. Notable increases were recorded in Brisbane, where average size required increased to 1,287square meters in the first quarter, up from 774 square meters in the first quarter of 2015, and Canberra, which recorded a significant jump in average size enquired for from 1,167square meters to 1,942 square meters. There was also an increase in average size requirement in the Sydney CBD, from under 1,000 square meters in the first quarter of 2015 to over 1,600 square meters in the first quarter of 2016. Locations that saw a small drop in average size included Sydney Metro and Melbourne CBD. ‘This quarter, we have seen the greatest number of large businesses enquire for office space in almost 10 years, which has contributed to the increase in the average area currently in demand,’ Hunt said. ‘This trend is also flowing through to transactions. In the first quarter of 2016, we have seen an increase of more than 15,000 square meters or 22% in the amount of office space leased. Larger businesses are doing the deals at the moment and this is showing up in both transactional and demand data. In the coming months, we expect smaller businesses will also increase their activity,’ he added. According to Simon Crouch, Colliers International head of tenant advisory, much of this smaller demand had been created by the compulsory acquisition of buildings associated with the Sydney Metro project. ‘Since February 2016 we have been appointed by 10 businesses averaging 300 square meters in size who require expert advice to help them through the relocation process,’ he pointed out. Continue reading
Uncertainty creeping into UK housing market likely to be short term
Uncertainty is set to creep into the UK housing market due to stamp duty changes, the European Union referendum and forthcoming regional elections, it is claimed. Overall short term confidence in the market has flattened following the rush from buy to let investors to beat the extra 3% imposed on additional homes at the start of April, says the latest monthly survey report from the Royal Institution of Chartered Surveyors (RICS). Survey respondents say that the uncertainty is fuelled by stamp duty changes, a weaker pound, the UK potentially leaving the EU (Brexit) and devolved elections in Scotland and Wales and local elections in England. The report also shows that the rate of house price inflation is slowing with indicators pointing to more modest house price gains and house prices have fallen further in London than elsewhere. These factors have been most strongly felt in central London, where 38% more respondents expected to see house prices fall over the next three months. The report also says that across the UK, while expectations around the number of new house sales peaked following the Chancellor’s Autumn Statement, this trend has reversed with 2% more respondents expecting to see the number of sales fall rather than rise over the coming months. Confidence around house price inflation has also dampened with 17% of respondents (net balance) expecting to see prices rise over the next three months, compared to 44% (net balance) in December. However, the longer term outlook suggests that prices will still be expected to rise by more than 4% each year for the next five years across England and Wales, with prices in London projected to grow by a broadly similar amount rising by 3% each year over the same period. Despite, the increased rates of stamp duty tax, now expected to be paid by prospective landlords, rent inflation, while expected to increase, is not predicted to rise any faster than it has in previous months. Although over the next five years respondents continue to anticipate rents will increase by an average of 4.5% per annum, there is no indication yet that tax increases are being passed on to the tenant. The expected rate of rent of inflation has remained constant for the past year at around 3%. ‘As expected, the buy to let rush has now run its course and, as a natural result, the market is starting to slow. But there are other significant factors that are currently weakening short term confidence in the UK property market,’ said Simon Rubinsohn, RICS chief economist. ‘Elections inevitably bring with them periods of uncertainty in the market, and our figures would suggest that next May’s devolved elections are no exception. Likewise, the EU referendum, is likely to be an influencer in terms of the damper outlook for London in particular,’ he added. ‘However, all indications suggest that whatever the outcome of the forthcoming elections and referendum, in the long term, the imbalance between demand and… Continue reading
UK referendum on European Union membership set to hit real estate markets
The forthcoming UK referendum on the country’s future in the European Union poses risks for the re sector due to the uncertainty it is creating, according to a new analysis report. This uncertainty leading up to the vote on 23 June is likely to have a somewhat paralysing effect on investor decisions on real estate purchases, says the report from Standard and Poor’s. It also says that should the country decide in favour of leaving the EU, known as Brexit, then the uncertainty will be prolonged during the subsequent exit negotiations and this may turn investor sentiment more negative. ‘This could potentially reverse the significant boost to real estate asset values that the UK and London in particular has experienced in recent years. Added to this, financial services firms, already under pressure to contain costs, may find an additional reason to reduce office space in London,’ the report explains. ‘Consequently, we consider the risks to the real estate sector of a Brexit may be most pronounced in the commercial real estate sector, particularly in the office segment, more than in retail and logistics,’ it points out. ‘We also think the effects will be more concentrated in London than other parts of the UK. Within the capital, the City of London would be hardest hit, because of a high concentration of international financial services firms,’ it adds. Given the possible negative consequences of Brexit, Standard and Poor’s said that its ratings on real estate investment companies, home builders, and structured financing in commercial and residential mortgage backed assets will require ongoing monitoring. It suggests that in the next few months ahead of the referendum, the uncertainty regarding the outcome of the vote may slightly disrupt the real estate markets. ‘We think it could lead to some deferrals in deals, timed to close after, rather than before the June 2016 vote. We expect that commercial real estate may be more heavily affected than residential overall, as businesses may delay their investment decisions and investors may put on hold contemplated transactions pending more clarity on the referendum result,’ the report says. ‘In our view, a vote in favour of Brexit would accentuate and prolong this period of paralysis since it would most likely take several years for the terms of the exit to be defined. Since the 2009 downturn, wealthy individuals and institutional investors have considered the UK real estate sector a very safe asset class. These assets attracted sustained investor demand primarily for their value preservation characteristics,’ the report explains further. ‘A vote in favour of a UK exit from the EU in June 2016 would likely threaten that perception of safety, at least for some time. A falling UK currency may also contribute to such a change in perception but would also make real estate in the UK less costly to international investors in foreign currency terms,’ it states. It makes the point that residential real estate would not be immune to a Brexit. ‘The… Continue reading
