The Australian economy continued to track sideways over Q3 2013, with national economic growth in line with previous quarters at 0.6%, while annual growth to date was 2.3%. The Victorian economy recorded 0.5% growth over Q3 2013, following the upwardly revised 0.3% growth in Q2 2013. As a result, year to date growth was below-trend at 0.8%.
There has also been an improvement in global economic conditions with the US Federal Reserve announcing its intention to begin modest tapering of Quantitative Easing (QE). This should continue to support the declining AUD and in turn the Manufacturing sector, a large portion of Victoria’s GDP.
New supply additions in Melbourne’s CBD reached approximately 200,000 sq m in 2013. More than 165,000 sq m of this was delivered in the first half of the year and close to 35,000 sq m is estimated to have completed in the second. Looking forward, supply in Melbourne CBD has entered a lull, with no significant completions in the first half of 2014, while two new developments and one refurbishment account for all major supply expected in the second half.
Over the first half of 2013, Melbourne CBD experienced its first period of negative net absorption since 2009 and its highest vacancy rate since 2004.
This result was driven by the combination of weak tenant demand for existing space and above average new supply. The second half of the year has shown some tentative signs of improvement, with supply additions coming off a peak and several large prime grade space requirements being met. However conditions remain challenging for secondary space.
Investment in Q4 2013 in Victoria reached $1.24bn, up 30% quarter-on-quarter (q-o-q). Total investment activity for the year reached $3.9bn. Similar to the other major States, offices was clear the most active asset class, accounting for $2.6bn, or two-thirds, of total investment. Going forward, one of the largest issues for investment in Victoria, especially the Melbourne office sector is that of available stock given such high volume and liquidity in 2013.
Source : DTZ (Groupe UGL)