Tenant Demand Keeps Leasing Market On Boil
Sydney Morning Herald
Saturday July 12, 2008
IN A week of bad news for property trusts, the latest employment figures provided some optimism for the leasing market.
Craig James, the chief equities economist at CommSec, said the decade-high interest rates, soaring living costs and declining sharemarket returns may be taking a toll on consumer and business sentiment. Yet employers are shrugging off these concerns and are still hiring. The latest figures show that employment rebounded in June by 29,800, with full-time jobs up 24,000 and part-time employment up 5800. The unemployment rate fell to 4.2 per cent. The participation rate rose from 65.2 per cent to 65.3 per cent. The unemployment rate fell in all states except Victoria (up from 4.3 per cent to 4.6 per cent) and Queensland (stable at 3.8 per cent). Mr James said the resources boom and large capital spending on infrastructure projects were helping the labour market weather the global economic slowdown. "The unemployment rate is literally creeping away from the generation lows set earlier in the year, and yet the Australian labour market is still in a much more enviable position than counterparts overseas." These figures augur well for leasing agents because they mean companies are still keeping staff and that tenants are continuing to look for small to medium space. While commercial property sales are being held back by the weak state of the listed property trust sector, leasing agents remain very busy. Nick Manettas's 61 York Street development has had solid leasing demand, defying the sentiment in the overall commercial property industry. More than two-thirds of the 18-storey project has been committed to a range of tenants in leases totalling about 2200 square metres. Tourism New Zealand (200 square metres), the boutique consulting firm Blackdot (200 square metres) and the specialist foreign exchange strategists and traders HiFX (350 square metres) are among the tenants to have committed to the building, taking out more than 77 per cent of the available office space. CB Richard Ellis's offices services negotiator, Zoe Vogel, said the lack of high quality city office space for smaller occupiers had underpinned the strong tenant demand and allowed the project to command premium rents of up to $825 a square metre gross. The average is about $670 a square metre. "Smaller occupiers would generally have to share a floor with other tenants, but in the case of 61 York Street these successful smaller business operators have been able to lease an entire level in the building, which has average floor plates of around 200 square metres," Ms Vogel said. Joshua Pails, of Savills, recently negotiated the lease of a whole floor in the C+ grade strata building at 261 George Street on behalf of the owner Kingsmede Pty Ltd. Demand for these sites was strong, he said. The 330 square metre floor was leased to the investment advisers Global Value Investors at $650 a square metre gross. Mr Pails said there was significant interest in vacant space becoming available at 261 George Street. Savills's divisional director of office leasing, Robert Dickins, has been appointed joint leasing agent for five floors in the newly refurbished 66 Clarence Street, Sydney, owned by AMP Capital Investors. Asking rents are about $550-$590 gross a square metre for office space ranging between 622 square metres to 882.6 square metres. Jones Lang LaSalle is the joint leasing agent of 66 Clarence Street.
© 2008 Sydney Morning Herald