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Vol 12. No.4

Landsburys Independent Accreditation Reports

Economic Overview

	Current	+/-	Movement
$AUS/$US	99.54	-0.28
Cash Rate	4.75	Steady
90 Day Bill	4.99	+0.03
10 Year Bond	5.593	+0.048
ASX 200	4705.0	-20.0

New South Wales Property

• The largest office transaction in Sydney last year closed late last month.
• The unlisted MacarthurCook Industrial Property Fund bought 320 Pitt Street for about $192 million.
• The sale showed a yield of about 7.5%.
• The 29,159 square metre tower is 99% occupied by Telstra.
• The tower was sold by Investa Property Group and its main fund for retail investors, the Investa Diversified Office Fund (IDOF).
• The Pitt Street tower had been slated to go into Investa’s planned office trust float in 2009 on a yield of about 7.75%.

National Property

• Office rental costs are expected to increase in most capital cities as growing business confidence fuels growth in white-collar jobs and tight credit constrains new office supply.
• Vacancy rates in all major CBD office markets aside from Brisbane will fall this year, according to industry forecasts.
• Finance and insurance companies are expected to lead the charge as they revisit growth plans that were shelved during the global financial crisis.
• As landlords regain the upper hand, leasing incentives such as rent-free periods and fitouts that were readily available in the past few years are expected to fall.
• The Melbourne leasing market remained strong all year, in other cities leasing activity and tenant inquiry did not pick up until late in the year, with a number of deals struck in the final quarter.
• Some of Sydney’s vacant towers are starting to fill up: the office component of the $270 million-plus development at 420 George Street is 70% full after global financial services provider State Street Corporation and technical services group Aecom signed leases in February and November.
• Commonwealth Property Office Fund’s refurbished 175 Pitt Street is 75% leased after law firm Kemp Strang and the Australian Taxation Institute signed up.
• The higher activity levels at the end of 2010 are being hailed as a sign of things to come.
• Sydney has a vacancy rate of about 8.56%, but this is set to dip to 7.16% by January 2012. Melbourne’s rate will likewise fall from 6.35% to 5.63%, whereas new supply will push Brisbane from 9.6% to 12.8%.
• Rental growth is expected from the second half of 2011, as total vacancy levels trend gradually downwards.
• In the next two years Melbourne, which has outperformed for the past few years, is again expected to achieve the strongest rental growth. Sydney is set to follow, and Adelaide will also achieve rental growth above the national average, whereas Brisbane, Canberra and Perth will lag.
• Slimmer leasing incentives mean effective rents (total rent paid minus leasing incentives) are set to rise more than total rent figures indicate.
• Incentives in Melbourne were at 15 to 20% for A-grade and premium buildings. In Sydney, incentives averaged about 30% for vacant space and 20% or below for sitting tenants.