Sydney, Melbourne secure top spots globally for office rental performance

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Property Mortgages
Luxury houses and apartments with multi-million dollar price tags tower over Sydney Harbour September 19, 2003. Reuters/Will Burgess

Sydney and Melbourne have both recorded the highest annual rental growth globally thanks to the demand for office space. The Australian states beat San Francisco and New Jersey in North America, the latest JLL Global Office index has revealed.

Based on JLL’s Q3 Global Office Index, Sydney exceeded all other markets for growth in office rents for the year. The index shows that Sydney has seen a 30.1 percent annual growth in prime rents. For Melbourne, it was a 17.3 percent year-on-year growth for the same period, making it number two in the global list.

American cities follow, with San Francisco Peninsula in the third spot at 12.9 percent annual rental growth. New Jersey was at 12.2 percent and Portland was in fifth at 10.4 percent.

Cadigal Leasing and Colliers International are backfilling 6,000 square metres of office space in Chatswood, which means it is not only the central business district on demand. Vacancy rates in the area keep declining.

Sydney is consistent in the top 10 global performers rankings for the past five years, Tim O'Connor, JLL's head of office leasing Australia, has noted. Melbourne, on the other hand, is part of the list for the past two years.

O'Connor said Sydney was on the number one spot two years ago, while Melbourne was in the 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," he said. The number of options for larger space users in existing stock, O'Connor added, means demand will be expressed through additional pre-commitment activity.

Colliers International director of office leasing Lisa Treble said the space at Chatswood had been filled with tenants. These include Filtered Media, Pronovate, Trend Wealth and Venita with rents of $535 per sqm net.

"Chatswood is seen by tenants on the north shore as a great business hub where there is no disruption on the streets from developments. Tenants are drawn to this location as it is well equipped with the large retail precinct so close to the CBD core," the agents said, according to Sydney Morning Herald. It is expected that Chatswood will continue to appeal to tenants as the surrounding office markets continue to undergo developments.

JLL’s Victorian Managing Director, David Bowden said Melbourne’s CBD office market benefits from strong population growth. Such growth fuels business expansion in a diverse range of sectors.