Melbourne metropolitan office research forecast report second half 2012


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Melbourne metropolitan office research forecast report second half 2012

  1. 1. SECOND HALF 2012 | OFFICE RESEARCH & FORECAST REPORT MELBOURNE METROPOLITAN OFFICE Investment Activity Returns The vacancy rate in the Melbourne Metropolitan office market increased from 6.2% in March 2012 to 7.1% in September 2012, primarily as a result of a significant amount of backfill space entering the market plus four new buildings have been completed in the last six months, resulting in 13,000m² of additional space being added to the market. Tenant demand continued to be consistent and this has led to average net face rents increasing by 3.4% over the past six months. Lease renewal activity remained strong across Melbourne Metropolitan office market. The City Fringe market exhibited strong growth in rents with a 7.7% increase in rents over the past six months. This occurred despite an increase in the vacancy rate from 5.5% in March 2012 to 7.8% in September 2012. The increase in the vacancy rate was due to approximately 25,000m² of backfill space entering the market. The South East saw a reduction in the vacancy rate over the reporting period, as a result of no new S8, 576 Swan Street, Richmond. supply in the market. Within the South East region, the Clayton vacancy rate remains the highest of all the suburbs, while the Dandenong vacancy remains one of the lowest. The Outer East currently has the highest vacancy rate in the Melbourne Metropolitan office market at MARKET INDICATORS FORECAST - 6 MONTHS 7.9% and vacancy has remained stable over the past six months. Major tenants moving to quality buildings resulted in positive net absorption of 8,153m² over the past six months. OVERALL PERFORMANCE Investment demand has remained strong from Private Investors, Owner Occupiers and Syndicates over NEW SUPPLY the past six months. The main focus from buyers has been on fully leased quality assets. For the six months to September 2012, there have been 12 transactions in excess of $5 million, totalling $151 TENANT DEMAND million. This is a significant increase from the previous six months, where four transactions totalling $28 million were recorded. Private Investors were the dominant purchasers during the last six months. VACANCY There were two properties sold with vacant possession. Average yields have softened by 0.25% over INCENTIVES the last six months. FACE RENTS MELBOURNE METROPOLITAN OFFICE MARKET INDICATORS EFFECTIVE RENTS Vacancy Average Net Average Average Average Stock Incentive Region Rate Face Rents ($/ Outgoings Capital Value Market Yield* CAPITAL VALUES (m²) Range (%) (%) m² pa) ($/m² pa) ($/m²) (%) YIELDS LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH TOTAL 2,810,298 7.1% KEY HIGHLIGHTS CITY FRINGE 889,820 7.8% $320 $380 $65 $90 12.5% 20.0% $3,000 $5,000 8.00% 9.25% • acancy is now at 7.1%, it has increased V INNER EAST 550,397 6.9% $310 $355 $50 $80 10.0% 12.5% $3,000 $4,750 8.00% 8.75% from 6.2% in March 2012. OUTER EAST 769,351 7.9% $235 $310 $40 $60 10.0% 15.0% $2,500 $3,750 8.25% 10.00% • ver the past six months, average net face O rents increased by 3.4%. SOUTH EAST 376,902 4.9% $220 $260 $40 $55 12.5% 15.0% $2,000 $3,000 8.75% 10.00% • verage yields softened by 0.25% A NORTH WEST 223,828 5.9% $215 $260 $35 $45 12.5% 15.0% $2,250 $3,500 8.25% 10.00% *Equivalent Revisionary Yield Data correct as at Q3 2012 Source: Colliers International Research
  2. 2. RESEARCH FORECAST REPORT | SECOND HALF 2012 | OFFICE | MELBOURNE METROPOLITAN Economic Update GDP GROWTH REMAINS STRONG The June Quarter 2012 ABS Gross Domestic Product (GDP) data showed robust growth for the Australian economy during the quarter. In seasonally adjusted terms, GDP increased 0.6% during Q2 2012, down from a strong 1.4% in Q1 2012, taking through-the-year GDP growth to a strong 3.7%. The main contributors to expenditure on GDP during the quarter were household final consumption, general government final consumption and net exports. In terms of industry sectors wholesale trade, transport and professional, scientific and technical services each industry contributed 0.1 percentage point (pp) to the increase in GDP. INTEREST RATE For the fifth time in the past 12 months, the Reserve Bank of Australia (RBA) decided to cut the official cash rate at its monthly board meeting. This saw the RBA reduce the cash rate by 25 basis points from 3.50% to 3.25%, as of October 2012. This latest fall has seen the cash rate decline by 150 basis points over the past 12 months, from a high of 4.75% in October 2011. The key driver behind the board’s decision was the recent deterioration in the outlook for the Australian and global economy. INFLATION RATE REMAINS LOW The latest inflation data from the Australian Bureau of Statistics (ABS) shows that annual headline inflation rose just 1.2% during the 12 months to June 2012, compared with a rise of 1.6% through the year to March 2012. This saw the Consumer Price Index (CPI) grow by 0.5% during the quarter and ensures that the inflation rate remains well below the RBA’s target range of 2% to 3%. AUSTRALIAN DOLLAR REMAINS STRONG Ongoing uncertainty over European sovereign debt issues, combined with the slow pace of economic growth and recovery in the United States has seen the Australian Dollar remain strong over the past 18 months. This saw the Australian Dollar trade at $US110.62 in July 2011, the strongest rate on record. After fluctuating above and below parity with the US Dollar over the first half of 2012, the recent round of quantitative easing (QE3) announced by the US Federal Reserve has seen the Australian Dollar recently trade between $US1.02 and $US1.06. UNEMPLOYMENT FALLS The August 2012 monthly ABS Labour Force data shows that the Australia employment market continues to remain tight. The latest results saw the unemployment rate decline by 0.1 percentage point (pp) from 5.2% in July to 5.1% in August 2012. This saw the number of people employed decrease by 8,800 to 11,498,100 and the number of people unemployed decline by 10,600 people to 622,600 during the month. Another key component behind the fall in the overall unemployment rate was a 0.2pp decline in the labour force participation rate to 65.0% in August 2012. MELBOURNE METROPOLITAN OFFICE MARKETS Preston North ad Ro ing nR ter es W Heidelberg We Moonee Ponds ste rn H Sunshine igh wa Doncaster y East Link Footscray Ringwood Inner Hawthorn Eastern West Melbourne CBD East Freewa y City Fringe Box Hill y Richmond Bayswater es Fr ee wa Camberwell Outer East South Yarra inc Pr Altona 5k Burwood m Burw ood R oad South East 10 Mount Waverley km 15 Mulgrave km Ne pea nH igh wa 20 Eastlink y km Moorabbin Mo Pr Mentone in na ce sh s Hi Fr gh ee w wa ay y Dandenong COLLIERS INTERNATIONAL | P. 2
  3. 3. RESEARCH FORECAST REPORT | SECOND HALF 2012 | OFFICE | MELBOURNE METROPOLITANKey Market IndicatorsWHITE COLLAR MELBOURNE METROPOLITAN FORECAST WHITE COLLAR EMPLOYMENT GROWTHEMPLOYMENT FORECAST SEPTEMBER 2012 TO MARCH 2013• Deloitte Access Economics provides Wholesale Trade quarterly findings on white collar Construction employment growth forecast. Electricity, Gas, Water and Waste Services Information Media and Telecommunications• Total white collar employment growth for all Other Services Administrative and Support Services industries combined was 0.7% between March Retail Trade 2012 and September 2012. It is forecast to Rental, Hiring and Real Estate Services Total grow by 0.3% until April 2013. Health Care and Social Assistance• The white collar component of the professional, Transport, Postal and Warehousing Professional, Scientific and Technical Services technical and scientific services is forecast to Manufacturing have the strongest growth of 2.8%, while the Education and Training Public Administration and Safety Agricultural Mining industry is forecast to Accommodation and Food Services experience the strongest decline of -3.5%. Agriculture and Mining Arts and Recreation Services Financial and Insurance Services -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% Source: Deloitte Access Economics / Colliers International ResearchVACANCY INCREASED IN VACANCY BY PRECINCTMOST MARKETS 9%• Melbourne’smetropolitan office vacancy rate 7.9% 8% increased from 6.3% in March 2012 to 7.2% in 7.1% 7.8% 7.7% September 2012. 6.9% 7.0% 7% 6.7% 6.8% 6.8% 6.4% 6.1% 6.2%• During the six months to September 2012, 6.1% 5.9% 6% 5.7% 5.9% 5.9% net absorption in Melbourne’s suburban office 5.5% 5.2% 5.0% 4.9% 5% 5.0% market was -10,774m², while net supply was 4.8% 4.5% 12,840m². 4%• The South East region saw the greatest drop of 3% 1.89%, from 6.8% in March 2012 to 4.89% in 2% September 2012.• Approximately 47.000m² of new office space is 1% expected to be completed over 2012 and 2013; 0% however the majority of new supply is Total Metro Market City Fringe Inner East Outer East South East North West pre-committed. Mar-11 Sep-11 Mar-12 Sep-12 Source: Colliers International ResearchNET FACE RENTS CONTINUE TO GROW AVERAGE NET FACE RENTS• Net face rents continued to increase across all $400 regions in the Melbourne Metropolitan market with the exception of the South East region. $350 $350 $333• The City Fringe region had the strongest growth $310 $310 $325 $310 $315 $325 among all regions. It recorded a 7.7% increase $300 $287 within six months, achieving $250/m² $262 $267 $278 $260 $273 $250 compared to $325/m² in March 2012. $250 $245 $240 $240 $238 $238 $233 $225 $225 $220• The Inner East region recorded a 5% increase $200 within six months, achieving $333/m² compared to $325/m² in March 2012. $150• Rents are expected to continue to increase over the next six months. $100• Incentives remained stable in all regions except for the City Fringe where they $50 increased by 5%. $0 Total Metro Market City Fringe Inner East Outer East South East North West Mar-11 Sep-11 Mar-12 Sep-12 Source: Colliers International Research COLLIERS INTERNATIONAL | P. 3
  4. 4. RESEARCH FORECAST REPORT | SECOND HALF 2012 | OFFICE | MELBOURNE METROPOLITAN City Fringe BACKFILL SUPPLY INCREASES CITY - Botanicca precinct: Civil engineering FRINGE VACANCY groups such as Fulton Hogan and Golder • The City Fringe vacancy increased from Associates and global firm GE Capital 5.5% in March 2012 to 7.8% in September dominate the Botanicca precinct due to 2012. No new supply was completed in the its proximity to the freeway network. region during the last six months. Expansion of office space by existing tenants is a key driver for the precinct. • The main reason for the increase in vacancy • Existing Richmond tenants are highly unlikely in the region was the addition of backfill supply to the market. This includes: to move out of Richmond, meaning the511 Church Street, Richmond. market is set to tighten as demand for officeREA leased 4,300 m² at $415/m² pa. - 81 Victoria Parade, 1 space continues to come from surrounding Collingwood – 7,420m²; suburbs like Hawthorn. - 9-81 Victoria Parade, 7 Collingwood – 2,200m²; - 50 Chapel Street, 6 RENTS INCREASE IN THE REGION South Yarra – 3,000m²; • Average net face rents increased by an average - 78 Victoria Street, 6 of 7.7 % over the past six months and are Richmond – 3,000m²; and currently at $320/m² – $380/m² pa. Rents are expected to remain stable over the next six - 50 Lorimer Street, 8 months. Port Melbourne – 2,500m² • Incentives increased by an average 5% over • With only 3,500m² of new supply due for the past six months and currently range completion during 2013 and consistent tenant between 12.5% - 20% and are expected to demand, we expect the vacancy rate to decline. remain stable over the next six months. • The City Fringe region experienced negative net absorption of 18,961m² for the six months to September 2012. SALES ACTIVITY REMAINS STRONG • The vacancy rate in Richmond is now at • In the City Fringe region there were seven 8.2%, while Collingwood has the highest sale transactions in excess of $5 million that vacancy rate in the region of 42.6%, with occurred between March 2012 and 22,956m² available for lease. This is mainly September 2012, totalling $90.8 million. due to a large amount of backfill space • Three out of these seven transactions were entering the market. vacant possession sales, with two properties • Port Melbourne has been impacted by being purchased by Owner Occupiers. These Government contractions, planning changes transactions included: and declining government spending. This has - 100 Wellington Parade, East Melbourne, resulted in 15,000m² of backfill space purchased by The Royal Australian entering the market. College of General Practitioners for $23 million at $3,685/m²; and MARKET SEGMENTATION IN - 57-61 Balmain Street, Richmond RICHMOND purchased by Spec Property Group for $7 million at $5,000/m². • The Richmond market has been segmented • Other major investment sales transactions in into three precincts: the region included: - hurch Street precinct: The Church Street C precinct is popular with tenants who are - 15-31 Pelham Street, Carlton sold for keen to attract younger generations (e.g., $20.6 million to Forza Capital at $3,489/ Generation Y). This was a key driver of REA m² reflecting a yield of 8.6%; and group’s relocation from the Victoria Gardens - 11-17 Dorcas Street, South Melbourne precinct to the Church Street precinct. sold for $14.38 million at $3,701/m² - ictoria Gardens precinct: The types of V reflecting a yield of 8.18%. tenants locating in this area tend to be firms • Average yields in the City Fringe region looking to upgrade from premises in the softened over the last six months and Inner East. The Inner East currently has currently range between 8% - 9.25%. limited options, particularly for new space • Average capital values declined slightly from and as a result Victoria Gardens is a viable $3,250/m² - $5,000/m² in March 2012 to alternative. This trend was reflected by $3,000/m² - $5,000/m² in September 2012. Freelance Global moving from Hawthorn to 600-610 Victoria Street, Richmond. COLLIERS INTERNATIONAL | P. 4
  5. 5. RESEARCH FORECAST REPORT | SECOND HALF 2012 | OFFICE | MELBOURNE METROPOLITAN Inner East INNER EAST VACANCY INCREASED TO RENTS INCREASE IN THE REGION 6.9% • Average net face rents in the Inner East • Vacancyin the Inner East region increased region increased over the past six months to 6.9% in September 2012 from 5% in and now range between $310/m² - $355/m² March 2012. pa. We expect rents to increase further over • Twonew buildings were completed during the next six months. the past six months totalling approximately • Incentives remained stable in the region over108 Power Street, Hawthorn. 3,100m² – 6-12 Elizabeth Street, Camberwell, the past six months and currently rangeSold for $17.5 million to IOOF in June a speculative development of 1,100m²; and between 10% - 12.5% and are expected to2012 at $4,680/m² 917 Riversdale Road, Camberwell, another remain stable over the next six months. speculative development of 2,000m². • TheInner East region experienced negative INVESTMENT SALES net absorption of 7,568m² over the six • There were two major sale transactions in months to September 2012. excess of $5 million between March 2012 • The biggest drop in vacancy was in Balwyn and September 2012: where vacancy declined from 8.1% in March - 863 High Street, Armadale sold for $14.5 2012 to 5% in September 2012. million at $4,557/m², achieving a 8.25% yield based on estimated fully leased FLIGHT TO QUALITY LOCATIONS market rent. This property is a new • Demand continues to be predominantly building with 50% vacant at the time of driven by local occupiers looking to expand sale and the vendor gave a two year net and tenants considering consolidating their rent guarantee on the vacancy. operations to a central location. - 108 Power Street, Hawthorn (a two year • Oneof the key trends in the Inner East region old building fully leased to five tenants) was the movement of large tenants was sold for $17.5 million at $4,680/m² relocating to CBD / Docklands for achieving a 8.47% yield. consolidation of operations. • Average yields in the Inner East region • Major tenants, including Penguin Books, will softened by 25 basis points over the past six move from Camberwell to Docklands and months and are sitting at 8% to 8.75%. have leased 7,000m² of office space. • Average capital values declined slightly from Another example was the relocation of BUPA $3,250/m² - $4,750/m² in March 2012 to from Hawthorn to the CBD, taking 12,000m². $3,000/m² - $4,750/m² in September 2012. • Priceline moved from Bayswater to Penguin Book’s backfill space at Camberwell and the Skilled Group moved from Box Hill and leased Telstra’s backfill space at Hawthorn. COLLIERS INTERNATIONAL | P. 5
  6. 6. RESEARCH FORECAST REPORT | SECOND HALF 2012 | OFFICE | MELBOURNE METROPOLITAN Outer East ABSORPTION REMAINS POSITIVE - Melbourne General Practice Network • Vacancy in the Outer East fell marginally leased 1,525m² at 6 Lakeside Drive, from 8.0% in March 2012 to 7.9% in Burwood East; September 2012. - Pronto Software leased 1,500m² at 378 • Onlyone new building was completed during Burwood Highway, Burwood East; and the last six months – 2 Nexus Court, - Ambulance Victoria leased 800m² at 1 Mulgrave totalling 5,500m², with 4,500m² Lakeside Drive, Burwood East.6 Lakeside Drive, Burwood East already pre-committed to Carlisle Homes. • Net face rents in the region increased duringMelbourne General Practice Network • A total of 54,300m² is currently under the past six months with average rents nowleased 1,525m². construction and due for completion between ranging from $235 - $310/m² pa. Rents are now and 2014. Approximately 80% of the area expected to increase in the next six months under construction is already pre-committed. as a result of declining vacancies and • Mulgrave had the biggest vacancy drop consistent tenant demand in the region. from 11.8% in March 2012 to 7.2% in • Incentives remained stable and are expected September 2012. to hold over the next six months. • Box Hill had the highest vacancy increase from 3.9% in March 2012 to 7.5% in CAPITAL VALUES AND YIELDS September 2012. This was mainly due to REMAINED STABLE backfill space at 30-32 Prospect Street, • 362 Wellington Road, Mulgrave was sold for Box Hill (3,000m²) and 836-850 Whitehorse $8.8 million in April 2012 to a private investor Road, Box Hill (3,755m²). reflecting a capital value of $2,437/m² and a yield of 10.07%. TENANTS MOVING TO QUALITY • Average capital values in the region BUILDINGS remained stable and are now ranging • Some tenants in the Outer Eastern office between $2,500/m² and $3,750/m². precinct moved their businesses to new • Average yields softened by an average of buildings that offered better quality 25 basis points and are now ranging construction and operational cost savings. between 8.25% and 10%. • Largely, tenants in Mulgrave are choosing to stay in the area. • Someof the tenants are upgrading their premises to gain benefits from new Green Star buildings. • Major leasing transactions in the Outer East region over the past six months included the following: COLLIERS INTERNATIONAL | P. 6
  7. 7. RESEARCH FORECAST REPORT | SECOND HALF 2012 | OFFICE | MELBOURNE METROPOLITAN South East VACANCY TIGHTENS TO 4.9% RENTS AND INCENTIVES • Vacancy rates in the South East region REMAINED STABLE declined from 6.8% in March 2012 to 4.9% in • Despite the decline in vacancy and increased September 2012. tenant demand, rents and incentives have • In the past six months there was a positive net remained stable over the past six months. absorption of 7,123m² in the South East region. • Average net face rents continue to remain • Thereis currently no new supply under steady averaging $240/m² and ranging from311 – 319 Lonsdale Street, Dandenong $220 – $260 / m² pa. construction for the region.Red Cross leased 1,000m² at $250/m² pa. • Incentives continue to remain stable and • Clayton had the biggest vacancy drop from 44.2% in March 2012 to 31.7% in range from 12.5% to 15%. September 2012. INVESTMENT SALES LEASING ACTIVITY CONTINUES • Averagecapital values remained stable over IN DANDENONG the past six months; they range between • Dandenong vacancy decreased further $2,000/m² and $3,000/m². from 9.2% in March 2012 to 7.6% in • Average yields remained stable currently September 2012. sitting between 8.75% and 10%. • AustralianRed Cross Society leased 952m² • Therehas been only one major sale in at 311 – 319 Lonsdale Street, Dandenong. excess of $5 million within the South East • TheSouth East region has a lack of large region over the past six months, being that of contiguous space options for tenants, 55 Robinson Street, Dandenong. This currently there are only three options over property was sold in June 2012 for $6.6 1,000 m² available for lease. million to a Private Investor. The sale price reflected a capital value of $2,418/m² and a yield of 9.22%. This property is fully leased to the Family Law Courts until March 2017. North West VACANCY DECLINED • Therewas only one sales transaction in MARGINALLY TO 5.9% excess of $5 million over the six months to • MetropolitanMelbourne’s North and West September 2012. 172 – 186 Moreland Road, regions are the smallest office markets, Brunswick was sold for $12.9 million at representing 8% of the total metropolitan $3,058/m² reflecting a yield of 10%. This office market. Total vacancy decreased to property is fully leased to Centrelink, with a 5.9% from 6.1% in March 2012. short lease period remaining. • Averagecapital values remained stable over • Thenet absorption between March 2012 and September 2012 was positive 627m². the six months to September 2012. Capital values currently ranges between $2,250/m² • Afive storey building at University Hill was and $3,500/m². Average yields softened over recently completed. It has delivered 4,400m² the past six months and currently range to the market and 2,400m² of this is already between 8.25% - 10%. pre-sold, leaving 2,000m² available for occupancy. • Averagerentals in the region increased marginally from $205/m² pa - $260/m² pa in September 2011 to $215 - $260 /m² pa in March 2012. COLLIERS INTERNATIONAL | P. 7
  8. 8. RESEARCH FORECAST REPORT | SECOND HALF 2012 | OFFICE | MELBOURNE METROPOLITANNew Supply Pipeline DEVELOPMENT UPDATE Estimated Address Suburb Total Area (m²) Status Comments Completion Date City Fringe S8, 576 Swan Street Richmond 8,200 UC 2013 4,300m² Pre-committed 649 Victoria Street Richmond 13,000 DA Approved 2013 Pending Pre-commitment 588 Swan Street Richmond 14,000 DA Approved 2015 Pending Pre-commitment Inner East 248 Burwood Road Hawthorn 3,000 DA Approved 2013 Speculative development build by Hacer Group Chadstone Office Building Chadstone 13,000 DA Approved 2013 Pending Pre-commitment 6-12 Elizabeth Street Camberwell 1,100 Complete Q3 2012 Speculative development 917 Riversdale Road Camberwell 2,000 Complete Q3 2012 Speculative development Outer East 2 Nexus Court Mulgrave 5,500 Complete 2012 4,500m² Pre-committed by Carlisle Homes 4 Nexus Court Mulgrave 5,500 Under Construction Q4 2012 4,300m² Pre-committed by Bristol-Myers Squibb Building B, 296 Ferntree Gully Road Mount Waverley 6,000 Under Construction Q1 2013 5,500m² Pre-committed by Schneider Electric Building C, 296 Ferntree Gully Road Mount Waverley 6,000 Under Construction Q2 2013 4,000m² Pre-committed by Olympus 6 Nexus Court Mulgrave 7,000 Under Construction 2013 5,200m² Pre-committed by ADP 50 New Street Ringwood 2,500 DA Approved Q4 2013 Speculative development 917 Whitehorse Road Boxhill 20,000 Under Construction 2014 Precommitment by ATO North West 240 Plenty Road Bundoora 4,400 Complete Q2 2012 University Hill - 5 Storey Office BuildingSource: Colliers International Research COLLIERS INTERNATIONAL | P. 8
  9. 9. RESEARCH FORECAST REPORT | SECOND HALF 2012 | OFFICE | MELBOURNE METROPOLITANMajor Office Suite Developments MAJOR OFFICE SUITE DEVELOPMENTS UPDATE NLA No. of Size of Capital Value Address Suburb Region Comments (m²) Suites Suites ($/m²) New office development with construction completed 9 Yarra Street South Yarra CF 7,500 62 33-895 $7,250-$8,000 and 100% of offices sold 15-87 Gladstone Street South Melbourne CF 5,000 71 40-500 $3,900 - $4,200 Construction completed in March 2011, 1 suite remaining for sale. 401 Docklands Drive Docklands CF 1,300 192 44 - 132 $4,100 -$5,000 6 office suites remaining for sale. Residential development with 2,050 m² of strata offices over 2 levels. 181 St Kilda Road St Kilda CF 1,900 18 75-343 $5,900 - $6,600 100% vacant. Recently completed. Tooronga Commercial Development completed in Dec 2010. 2 office suites Corner Toorak and Hawthorn East IE 4,000 33 62-236 $5,300 - $5,900 remaining for sale Tooronga Roads 202 Ferntree Gully Road Notting Hill OE 4,250 26 180-360 $4,000 Construction now complete with only 1 office left for sale 400 Canterbury Road Surrey Hills OE 1,900 11 74-261 $4,800 100% sold. 12-14 Claremont Street South Yarra CF 2,206 12 62-326 $6,500-$7,500 6 office suites sold. University Hill - 5 storey office building. Construction commenced, 240 Plenty Road Bundoora N 3,950 39 48-291 $4,250 - $4,500 13 suites sold.Source: Colliers International Research COLLIERS INTERNATIONAL | P. 9
  10. 10. RESEARCH FORECAST REPORT | SECOND HALF 2012 | OFFICE | MELBOURNE METROPOLITANRecent Market Transaction Activity LEASING ACTIVITY Address Suburb NLA (m²) Tenant Net Face Rent ($/m² pa) City Fringe 19-29 Cromwell St Collingwood 780 Abundant Media $185 70 Jolimont Street East Melbourne 518 iCare $310 g 369 Royal Parade Parkville 818 UGL Infrastructure $275 369 Royal Parade Parkville 500 Inner North West Medical Local Limited $275 650 Lorimer Street Port Melbourne 1,300 SAI Global $265 120 Bay Street Port Melbourne 569 Defence Housing Australia $320 511 Church Street Richmond 4,300 REA Group $415 576 Swan Street Richmond 4,300 Undisclosed $380 600 Victoria Street Richmond 1,200 Emerald Group $335 658 Church Street Richmond 460 Paragon Publishing $320 101 Cremorne Street Richmond 976 Enterprise Support Pty Ltd $330 658 Church Street Richmond 2,700 Smart Group $315 7 Howard Street Richmond 250 Coty $315 68-70 Dorcas Street South Melbourne 520 Pernod Ricard Australia $270 650 Chapel Street South Yarra 510 Stellar $340 155 Roden street West Melbourne 906 Whitelion Inc $205 355 Spencer Street West Melbourne 2,558 SAI Global $340 Inner East 21 Shierlaw Av Canterbury 982 TSA $254 1183 Toorak Road Camberwell 700 Coca Cola Amatil $280 192 Burwood Road Hawthorn 600 BUPA $280 290 Burwood Road Hawthorn 1,100 Holcilm $355 381 Tooronga Road Hawthorn East 1,000 Liberty Oil $290 81-89 Cotham Road Kew 1,203 Planet Innovation $285 Outer East 26-28 Prospect Street Box Hill 383 PVS Work Find $275 378 Burwood Hwy East Burwood 1,500 Pronto Software $240 1 Lakeside Sr East Burwood 800 Ambulance Victoria $240 6 Lakeside Drive East Burwood 1,525 Melbourne General Practice Network $240 551 Blackburn Road Mount Waverley 500 Skilled $230 253-269 Wellington Road Mulgrave 575 Australian Grief and Bereavement $226G 310 Ferntree Gully Road Notting Hill 564 Tetra Pak $215 10 Caribbean Drive Scoresby 750 Network Neighbourhood $185 South East 311-319 Lonsdale St Dandenong 1,000 Red Cross $250g denotes gross face rentsSource: Colliers International Research COLLIERS INTERNATIONAL | P. 10
  11. 11. RESEARCH FORECAST REPORT | SECOND HALF 2012 | OFFICE | MELBOURNE METROPOLITANRecent Market Transaction Activity INVESTMENT SALES ACTIVITY Address Suburb Sale Date Sale Price NLA Capital Value Yield* Vendor Purchaser City Fringe 15-31 Pelham Street Carlton Apr-12 $20,600,000 5,905 $3,489 8.60% McMullin Group Forza Capital 100 Wellington Parade East Melbourne Apr-12 $23,000,000 6,242 $3,685 N/A Delios RACGP Levels 1 2, 155 Cremorne Street Richmond Jun-12 $10,600,000 2,444 $4,337 8.58% Deal Corporation Private Investor Level 4, 12-14 Claremont Street South Yarra Jun-12 $6,210,000 1,171 $5,303 8.80% Frid Corp Private Investor 11-17 Dorcas Street South Melbourne Jul-12 $14,380,000 3,885 $3,701 8.18% John Crane Asian Investor 57-61 Balmain Street Richmond Jul-12 $7,000,000 1,400 $5,000 N/A Undisclosed Spec Property Group 1 Palmerston Crescent South Melbourne Aug-12 $9,000,000 3,000 $3,000 N/A RACGP Alpha Partners, JAK Inner East 863 High Street Armadale May-12 $14,500,000 3,182 $4,557 8.25%** Little Projects Vantage Property 108 Power Street Hawthorn Jun-12 $17,500,000 3,739 $4,680 8.47% LAS Investments IOOF Outer East 362 Wellington Road Mulgrave Apr-12 $8,800,000 3,611 $2,437 10.07% Investec John Chua South East 55 Robinson Street Dandenong Jun-12 $6,600,000 2,729 $2,418 9.22% Hyperion Property Private Investor North West 172-186 Moreland Road Brunswick Jun-12 $12,900,000 4,218 $3,058 10.00% Australian Unity Paul Marks* Exchange Date** Equivalent Reversionary YieldSource: Colliers International ResearchInfrastructure Update MAJOR INFRASTRUCTURE PROJECTS Infrastructure Project Location Start Date Estimated Completion Date Comments Road Work on the Peninsula’s largest infrastructure project commenced in early 2010 and is expected to be completed in early 2013. 27km Peninsula Link Frankston to Mornington Peninsula 2010 Q1 2013 of freeway standard road. The $759 million Peninsula Link project will bring many benefits to people living in and visiting Frankston and the Mornington Peninsula. $2.25 billion upgrade, jointly funded by the state and federal governments, to include widening and improvements. The upgrade is being completed in sections, with the most congested sections Q2 2014 and those with the worst safety record being worked on first. M80 Ring Road Upgrade Edgars Road to Plenty Road 2009 (Phase 1)Source: Colliers International Research, VicRoads, State Government of Victoria COLLIERS INTERNATIONAL | P. 11
  12. 12. RESEARCH FORECAST REPORT | FIRST HALF 2012 | OFFICE | MELBOURNE METROPOLITANOutlook 522 offices inMelbourne’s metropolitan markets have performed consistently over the last six months, drivenby stable tenant demand and limited new supply. Only 32,700m2 of office space is currently 62 countries onunder construction. Of this around 70% has already been pre-committed. Some resistanceis still there for committing to new projects, primarily due to funding constraints. Consistent 6 continentstenant demand and limited new supply will keep vacancy stable over the next six months. United States: 147 Canada: 37For most of the regions, net face rents have increased during the last six months. We expect Latin America: 19rents and incentives to remain stable over the next six months. Asia Pacific: 201 EMEA: 118Private investors, owner occupiers and syndicates have begun to return to the Melbournemetropolitan office market. Following a relatively slow start to the year, investment sales • $1.8 billion in annual revenueactivity has improved significantly. This can be evidenced from 12 transactions in excess of • 1.25 billion square feet under$5 million which were completed for the combined value of circa $151 million between April management2012 and August 2012. We expect this trend to continue as investors currently focus on the • Over 12,300 professionalsfully leased quality assets. On the flip-side, average yields have softened by 0.25% duringpast six months but are now expected to remain stable over the next six months. COLLIERS INTERNATIONAL Level 32, 367 Collins Street, Melbourne VIC 3000 TEL 03 9629 8888 FAX 03 9629 4945 RESEARCHER Amita Mehrotra Manager/Research TEL 03 9940 7213 FAX 03 9092 1413 Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. COPYRIGHT - Colliers International 2012. Accelerating success. COLLIERS INTERNATIONAL | | P. 12 COLLIERS