Australia’s commercial property market is likely to weather the global credit crisis well, according to research from property and construction consultants Davis Langdon, but Brisbane’s on-going problem of commercial property demand outstripping supply continues to see record high rents being achieved.
Davis Langdon’s Commercial Tender Level Index which measures commercial construction price movements across Australia suggests that flow-on effects of credit market turmoil and global share market volatility will only influence Australia’s commercial sector briefly.
Davis Langdon predicts that initial market nervousness will be reflected by softening yields, but this is expected to be brief as the fundamentals of the commercial market in Australia are still quite strong.
“Jobs growth remains consistent and the unemployment rate remains at a 20-year low,” said national research manager Rachel Kelloway.
“There is a backlog of unmet demand in most Australian capital cities and a further million square metres of office space due for completion in 2008, 2009 and again in 2010.”
Nationally, Davis Langdon’s Tender Indices recorded median annual cost increases of 5.6 per cent across the past 12 months.
Davis Langdon forecasts increases in the vicinity of 6.1 percent across the upcoming 12 months, which are considered relatively constrained given the significant volume of work chasing limited resources.
Davis Langdon predicts that the high commercial rent situation in Brisbane is unlikely to change in the short term
However there is relief in sight for tenants due to the significant number of office developments now under construction.
“Whether the fallout from the US sub prime mortgage problems coupled with fears of probable interest rate rises leads to a softening of demand for Brisbane’s office market is yet to be seen,” said Ms Kelloway.
“Widely anticipated high increases in construction prices did not eventuate in 2007 – with escalation rates recorded at just under 4 percent across the year.
“Prices remain relatively contained although there are indications that some trades are now under pressure as resources again become scarce and construction workload picks up, particularly in the Government and infrastructure sectors.
“This is likely to start impacting on commercial projects and we are predicting increases of 6-7 percent during the upcoming year.”
For further information, contact Meaghan Jones at Davis Langdon's Communications Department on +61 3 9933 8800 or email mjones2@davislangdon.com.au
