Property Australia

Australia's cost effective space

PROPERTY AUSTRALIA December 18, 2018

Sydney and Melbourne office markets remain affordable by global standards, according to JLL’s latest premium office rent tracker, while Knight Frank ranks Sydney in the top six for prime residential real estate.

JLL’s Global Premium Office Rent Tracker assessed 72 office submarkets across 61 cities, finding the top three most expensive office markets were Hong Kong’s Central, New York’s Midtown and London’s West End.

Occupancy costs, including rent, taxes and service charges in Hong Kong Central set tenants back an average of US$338 per square foot per year – the most expensive for four years running.

This is 60 per cent more expensive than New York’s Midtown ($212) and 75 per cent more expensive than London’s West End ($195).

With average rents of $102 per square foot per year, Sydney ranked as the 20th most expensive city, while Melbourne ($52) came in at number 56.

Premium office rents refer to the ‘top achievable’ in units over 10,000 square feet (or approximately 1,000 square metres) in the premium building in the premier office district of each city.

“The key message from the report is the affordability of Sydney and Melbourne compared with other global cities,” says JLL’s head of office leasing for Australia, Tim O’Connor.

JLL says the outlook for prime net effective rents in Sydney and Melbourne is positive over 2019, with net effective rental growth in both cities expected to grow between 5.5 and 6.0 per cent.

“The underlying demand for premium grade space is reflected in the development pipeline. In the Sydney CBD, Wynyard Place, Quay Quarter Tower and Circular Quay Tower will all provide new opportunities for Premium Grade tenants,” O’Connor explains.

“The latent demand for Premium Grade assets in Melbourne is reflected in the development pipeline with 477 Collins Street and 80 Collins Street under construction and scheduled to complete in 2019 and 2020.”

Meanwhile, Sydney has ranked in the top six cities for the number of residential sales above US$25 million, according to Knight Frank’s first assessment of the global ultra-prime residential market.

According to the research, Hong Kong led the field, with US $2.5 billion in transactions, followed by New York, London, Singapore, Los Angeles and Sydney.

In total, 153 transactions above US $25 million took place in the 12 months to the end of August 2018 with a combined value of US $6.6 billion.

Sydney’s lifestyle and political stability make it the “destination of choice” for high net worth, says Knight Frank’s partner, and head of residential for Australia, Sarah Harding.

“All ultra-prime transactions in Sydney over the past three years occurred in the Eastern suburbs and all were for houses. However, this is based on completed properties and we expect that off-plan sales will further increase these numbers when further prestige apartment buildings in Sydney are completed.

“In the 12 months ending August 2018, the total value of ultra-prime properties (over US $25 million) sold in Sydney was US $219 million across five transactions.”