Banking royal commission boosts office markets

There have been unsubstantiated market suggestions that AMP is reviewing its AMP Life business to move into new, separate office space.

The finance and insurance sector is the driving force behind demand for CBD office space early in 2019, according to a new Colliers International report.

Colliers International’s CBD Office Research & Forecast Report for the first half of 2019 has found the nation’s major CBD markets, particularly Sydney and Melbourne, are set to receive a significant boost to demand.

“Whilst the whole nation eagerly anticipated the findings of the Financial Services Royal Commission in early February 2019, the commensurate impact on the nation’s office markets was a less talked about outcome,” Anneke Thompson, Colliers International national director of research, said.

“However, analysis of our tenant advisory team’s work in progress data indicates that nationally, the finance and insurance industry now lead the work in progress – with 18 per cent of all work being undertaken by our team Australia-wide linked to this industry.

“This data closely aligns with job vacancy data published by the ABS in January, which shows that finance and insurance jobs available now are at their highest level since in the series began in 2009.”

The implication to be taken from this data is that the major CBD markets – particularly Sydney and Melbourne, each home to two of our big four banks – are due to receive a further boost to demand in an already tight market.

“Over the last six months we have already seen a number of financial institutions come to market for sizeable requirements where they are splitting or selling off their wealth management business. These requirements to date have been focussed on the Sydney CBD,” Simon Crouch, Colliers International head of tenant advisory, said.

But finding the space will not be easy, given Sydney’s tight vacancy rate.

Aaron Weir, partner, head of office leasing NSW, for Knight Frank, said there were a number of major projects set to come to market in Sydney over the next three years, which will contribute to the Sydney CBD office stock level increasing by approximately 3.8 per cent, stemming from 440,000 sqm of new and refurbished stock coming to market over this timeframe.

“However, the pipeline over the next 12 months is relatively thin, until this more substantial stock comes to market in 2021 vacancy will remain low with tenants continuing to face limited options in the CBD,” Mr Weir said.

“In the last two years 390,000 sqm has been withdrawn from the market for government-led infrastructure projects and alternative uses. The significant level of withdrawals has coincided with subdued development completions adding to the downward pressure on vacancy.”

Carolyn Cummins is Commercial Property Editor for The Sydney Morning Herald.

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