How would you characterise your market at the moment?
The Canberra market has an air of uncertainty behind it. In some instances, Government departments have a need to relocate, however budget constraints are forcing them to seek fitted-out accommodation or stay put against their desire, even if the building is semi obsolete.
Are there any trends you are noticing among the tenants you are talking to?
The greatest challenge within the market is simple and it all boils down to finances. Most tenants, particularly in the government sector, are faced with increased pressure to save expenditure and improve their return to treasury through an increase in efficiency dividend. This is placing enormous pressure on decision-making processes.
What do you think will be the biggest influence on your market in Q2?
Government departments reviewing costs such as wages, marketing and advertising, as well as rent. Without doubt, the upcoming budget, particularly the Commonwealth budget and to a lesser extent, the ACT budget which is released in June. These events will generate a lot of interest from the property industry especially those who have vacancies.
An environment of cost control, redundancies and department re-shuffles is going to have an impact during Q2.
What will rents and incentives do in Q2?
Incentives for prime grade assets will remain stable over the next six to nine months. The disparity in incentive levels between prime and secondary grade buildings, particularly poorly presented buildings, will increase.
What should landlords do to adapt to these market conditions?
As in past quarters, landlords need to remain flexible and should try to maintain current fit out in situ to take advantage of short-term office accommodation needs.
Managing Director, ACT
Recent Leasing Deals
Market Balance, as at March 2012
Download a PDF of the Canberra Q112 Market Overview