In its Asking Price Index report, which examines the small and medium sized segment of the commercial property market across Australia each week, commercial property web site Commercial Property Guide says asking rents have started increasing again following a previous trend of more subdued rental conditions which took hold in early 2017 and was evident through until May this year.
All up, average asking rents across all markets and segments have increased by just over two percent over the last quarter – a rate which of increase which is generally steeper compared with those observed throughout most of the past eighteen months (see chart).
Driving this is momentum in the office market, particularly in Sydney.
In Sydney, average asking rents have risen by just over three percent over the past three months, Commercial Property Guide says.
In the office market segment nationwide, meanwhile, asking rents have risen by just over five percent during the last quarter.
In its report, Commercial Property Guide says the office market in Sydney was impacted by uncertainty prior to the last federal election but has since recovered now that the uncertainty surrounding the election has been removed whilst strong leasing activity is being underpinned by improving business confidence.
As well, it adds that the market for office space in general is being buoyed by a combination of robust demand brought about by strong white collar employment growth and a limited supply of space.
That employment growth can be seen in detailed employment data from the ABS.
Over the year to August alone, more than 93,900 workers throughout Australia were added to the payrolls of the professional, scientific and technical sector of the economy – an important office occupying sector.
Over the two years to August, meanwhile, the same data shows that employment growth in finance and insurance – another key office occupying sector – came in at a respectable 6.1 percent.
Outside of Sydney, Commercial Property Guide says average asking rents across all sectors have risen over the past quarter by just over two percent in Melbourne and barely one percent in Brisbane.
In Melbourne, prices have been in a general upswing since the middle of 2018 following a steady decline before that.
Outside of the office sector, meanwhile, retail rents have seen almost zero increase over the past three months after having increased steadily for most of the past twelve months prior to that despite gloomy retail trading conditions and negative media stories.
Asking rents in industrial, meanwhile, have been on a rollercoaster over the past year but have bounced back to come in at a nearly two percent over the past three months.
Simon Rose, chief executive officer of Commercial Property Guide, said understanding movements in asking prices for commercial property was critical for investors, commercial landlords and commercial tenants alike as this is one of the most accurate means by which to gauge the state of the market and therefore to decide the best course of action with regard to potential sale/purchase or leasing activity.
Whilst expert opinions have value, Rose says only sound data reveals a complete picture of what is going on.
Moreover, he says the Asking Price Index report provides a unique view as many other reports in this space focus predominately upon the super prime or prime assets rather than the broader market.