How would you characterise your market at the moment?
The Canberra market is truly a unique one whereby circa 60% of the accommodation is occupied by Commonwealth and/or Local Government. Similar to international corporates occupiers, the Commonwealth and Local Governments are also seeking efficiency gains from their accommodation.
Cost control is a major concern for all Departments and as a result we have noticed an increase in creep whereby Government Departments are taking short term accommodation i.e. up to maximum three years in various locations to cater for growth or lease expiries. The level of demand has definitely improved in the last six months and there is an air of optimism in the market.
Are there any trends you are noticing among the tenants you are talking to?
Current expectations hinge around cost control. All occupiers are looking for effective, efficient office accommodation at a competitive rate. Capital expenditure is a concern to all tenants including Commonwealth and Local Governments.
A growing dilemma for owners of secondary grade buildings in the current market is deciding whether to refurbish their accommodation bringing it up to a minimum 4.5-star NABERS rating or leaving it as is with fitout in situ so they can target short term tenants seeking to reduce their capital expenditure outlay.
What do you think will be the biggest influence on your market in Q1?
Recession within the European economies, the potential for a knock-on effect on employment in corporate Australia and the Government’s budget surplus target. In addition the possible impact to property as a result of the increase in the Government efficiency dividend requirement now at 2.5%
What will rents and incentives do in Q1?
Face rents and incentives will remain steady within the Canberra market for the next 1 – 2 quarters. Vacancies will need to get to a sub 10% level before we start to see a decrease in incentives. Face rents not expected to increase for at least 12 – 18 months.
What should landlords do to adapt to these market conditions?
In current market conditions landlords of existing buildings should try to maintain current fitout in situ to take advantage of short term office accommodation needs, generated by Government Departments or private occupiers trying to minimise capital expenditure.
Managing Director, ACT
Recent Leasing Deals
Download a PDF of the Canberra Q411 Market Overview