The Sydney office market is one of only three “leaders” in Asia Pacific in relation to rental increases and prospects for some further yield compression according to new CBRE forecasts.
Speaking at the firm’s annual Sydney Market Outlook event, CBRE’s Head of Research, Asia Pacific, Henry Chin, said Sydney, Hong Kong and Tokyo were the current office market standouts, with Korea, Seoul and Perth being the laggards.
Backed by these fundamentals, Mr Chin said key Australia markets such as Sydney remained well positioned to continue to attract investor interest, underpinned by the strong market conditions.
These forecasts also align with a new CBRE Investor Intentions Survey, details of which are due to be issued next month. The survey shows that Australia has jumped from second to first position in Asia Pacific as the market most favoured as a cross border investment destination.
CBRE Head of Research, Australia, Stephen McNabb, said the Sydney market was supported by much stronger fundamentals with net absorption tipped to average 55,000sqm per annum over the next three years underpinned by strong growth in IT and financial services firms. Net supply will also be negligible over this period as stock is withdrawn from the market.
This has been one of the attractions for offshore investors, Mr McNabb said, with inbound investment into the Australian commercial property market having increased by 45% in 2015 relative to the previous corresponding period.
However, Mr McNabb noted that investors needed to adjust their risk/return expectations.
“Yield compression has driven strong investment returns in recent years. However, investors will now increasingly be looking at the income growth fundamentals of their assets and what they can do to improve the growth potential of their individual assets and property portfolios,” Mr McNabb said.