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Vol 12. No.21

Landsburys Independent Accreditation Reports

Economic Overview

	Current	+/-	Movement
$AUS/$US	101.15	+0.85
Cash Rate	4.75	Steady
90 Day Bill	4.91	+0.01
10 Year Bond	5.532	+0.024
ASX 200	4796.5	+44.4

New South Wales Property

• The Sydney office market experienced a dip in vacancy in the second half of 2010.
• Property Council of Australia figures show the Sydney CBD vacancy rate falling from 8.5% in July to 8.2% in January.
• This was aided by 62,417 square metres of space absorption, the strongest demand since July 2007.
• The vacancy rate for premium grade space fell from 4.8% to its lowest level in a decade at 3.1%.
• A sharp decline in the sub-lease space – from 0.9% of supply to 0.5% - was a sign that companies had switched to growth mode.
• A significant amount of space is set to hit the Sydney CBD market this year – including new towers at 1 Bligh Street and Darling Walk.
• The 97,000 square metres of expected new supply represents 3.9% of the market.
• No new supply was expected in the CBD in 2012, which should equate to lower vacancy rates and stronger rental growth next year.
• On Sydney’s north shore – which includes the North Sydney, Chatswood, Crows Nest and St Leonards markets – the vacancy rate fell from 14.1% to 12.9%, between July and January.
• North Sydney was the strongest performer, with an 11.8% vacancy rate, while Chatswood continued to underperform with 18% vacancy.
• In Parramatta, vacancy dropped from 10.8% to 9.6%, while in North Ryde, it dropped from 11.3% to 10.3%.

• Redcape Property Group has exchanged contracts to sell the Port Macquarie/Town Green Inn Hotel at Port Macquarie for $15.8 million and the Ocean Shores Tavern at Ocean Shores in NSW for $4.6 million.

• Eureka Funds Management’s Core Property Fund 1 is looking to sell 10 Bridge Street, an office building next to the ASX’s Sydney headquarters.
• The building could sell for about $60 million.

Queensland Property

• Demand for Brisbane’s inner city commercial space may have lifted in the past few months but the outlook remains bleak, with vacancy rates set to rise as new office towers are completed with few commitments.
• Brisbane will still be one of the country’s weakest performing office markets despite a slight upswing in activity at the close of 2010.
• For the past three years Brisbane’s vacancy rate has hovered around the double-digit mark with the Property Council of Australia figures showing Brisbane’s vacancy rate fell from 11% in July 2010 to about 9% in January.
• Since then BHP Billiton has announced it will take 5,600 square metres of space in 12 Creek Street and Santos is seeking 10,000 square metres.
• Concerns remains over towers such as GPT’s One One One Eagle, which announced Norton Rose as its first pre-committed tenant.
• About 100,000 square metres of new stock will be completed in 2011, with less than 40% committed.

Victoria Property

• Rents in Melbourne could surge as much as 10% this year and in 2012 as the city’s office market remains the tightest on the mainland.
• The vacancy rate for Melbourne CBD is 6.3%, down from 6.5% six months ago.
• About 60,000 square metres of supply will be delivered over the next three years from major refurbishments, including Australand’s redevelopment of the former stock exchange building.
• This year, 40,169 square metres of new space is expected on the market. Another 100,375 square metres is expected in 2012. Of that 50% is pre-committed.
• Net effective rents grew by 12.4% in 2010, well above trend. Rents could rise by 10% a year in the next two years.
• Incentives, now around 17%, would dip to between 13% and 15%.

• Lend Lease is marketing a major Docklands asset after securing global engineering firm Aurecon as its anchor tenant.
• The building, which will offer 17,000 square metres, is expected to be completed by the second half of 2012 and could fetch as much as $120 million.
• Aurecon is on track to take up as much as 9,500 square metres, filling almost five of the large 2,000 square metre floors with its 700 Melbourne staff.
• Aurecon chief executive Paul Hardy said the tenancy was being finalised and that the engineering firm would also be involved in designing the building.

National Property

• Property Council of Australia figures show a recovery in the mining and financial services sectors has driven national office vacancy levels down to 9.5%.
• The vacancy rate fell from 10% in July 2010, its first drop since the global financial crisis took hold three years ago.
• Overall, 302,673 square metres of space was absorbed during the six month period to January 2011, well above the 20-year average of 173,141 square metres.
• Sub-lease space comprised a substantial part of the take-up, with more than 90,000 square metres absorbed. This pushed the sub-lease vacancy rate down from 1.5% to 1.1%.
• In CBD markets, the vacancy rate dropped from 9% to 8.6%.
• All CBD markets, aside from Adelaide and Hobart, experienced positive space absorption during the period.
• Outside CBD markets, the vacancy rate fell from 12.1% to 11.3%.
• The best performing market, in terms of vacancy, was the Hobart CBD at 4.6%. The worst was the Gold Coast, with 24%.
• The strong absorption in the second half of 2010 appeared to be fuelled by new demand for space, whereas in the first half of 2010, it was dominated by tenants honouring pre-commitments that had been made some time before space taken up in pre-committed new developments.
• Looking forward, the supply pipeline looked well balanced in most capitals, aside from Perth and Canberra.
• New supply for this year is expected to be largely in line with the 20-year average of 466,860 square metres with 472,161 square metres expected to enter CBD markets.

• New home sales fell for a second consecutive month in December following an unexpected rise in interest rates in November.
• The Housing Industry Association found new homes sold eased 0.6% in December, driven mostly by the fall in sales of multi-units. This brings the fall in new home sales over the second half of last year to 11%.
• New home sales were tracking below their long-term average, leading to growing housing shortages. This would put upward pressure on rents and could exacerbate price rises when the housing market gathered pace.
• However, while apartment numbers fell, sales of detached houses rose 0.3% nationally in December.
• Detached house sales rose 3.6% in NSW, 5.8% in Queensland and 4.2% in Western Australia.
• Sales of detached houses fell 3.7% in Victoria and 6.6% in South Australia.