Sydney and Melbourne have again taken out the top two spots globally for office rental performance, leading the list for annual prime office rental growth in the 2017 third quarter.
JLL’s Q3 Global Office Index shows Sydney way out in front globally in the number one spot for annual growth over the last year. Sydney recorded 30.1 per cent annual growth in prime rents. Melbourne recorded 17.3 per cent year-on-year growth for the same period, pushing it to number two global.
US cities came in next, with San Francisco Peninsula in third at 12.9 per cent annual rental growth, New Jersey at 12.2 per cent and Portland in fifth spot at 10.4 per cent.
“Sydney has consistently featured in the Top 10 Global performers rankings for the past five years and Melbourne for the past two years," JLL Australia's head of office leasing Tim O’Connor said.
“Two years ago, Sydney ranked number one, while Melbourne was ranked fifth. While the Sydney story has continued on the back of centralisation, stock withdrawals and growth from the technology sector in particular, Melbourne is now following hot on the heels.
“The sharp reduction in vacancy that precipitated the upward pressure in Sydney and Melbourne rents has been amplified by the lack of available new supply coming on line in the short term. The number of options for larger space users in existing stock now means demand will be expressed through additional pre-commitment activity,” O’Connor said.
[Related reading: Melbourne Office Market a National Standout]
The index shows that rental growth for prime offices across the 125 major markets covered by the JLL Global Office Index continued to pick up pace in Q3 2017, rising by 2.7 per cent year-on-year.
This was significantly above the 10-year average growth of 1.6 per cent.
Momentum is expected to continue with above-average increases in 2018, with a projected uplift of 3 per cent for the full year 2017 and 2.3 per cent globally next year.
"Sydney and Melbourne effective rental growth was in double digit territory over 2016 and 2017. We expect that effective rental growth will ease back from this rate in 2018," JLL Australia's head of research Andrew Ballantyne said.
“Nevertheless, Sydney and Melbourne effective rental growth is projected to remain above 7 per cent in 2018 with the potential to be even higher if the competition for space exerts further downward pressure on leasing incentives."
JLL's November 2017, Global Market Perspective Office Index can be found here.
