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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 New South Wales state economy recorded below trend quarterly growth in State Final Demand (SFD) of 0.4%, though year-on-year (y-o-y) growth improved from 1.3% in Q2 2013, to 1.8% in Q3 2013.
Globally, there has also been an improvement in economic conditions with the US Federal Reserve announcing its intention to begin modest tapering of Quantitative Easing (QE). The Federal Reserve has been careful to mitigate negative impacts and has signalled that low interest rates will remain for the near-term.
Over the past 12-months, Sydney CBD has received stock additions in line with the 10-year average of approximately 135,000 sq m. This was made up of nearly 75,000 sq m of new space and 60,000 sq m of refurbishments. The majority of this stock was added to the prime market. Beyond 2015, there is approximately 280,000 sq m at various stages of planning and construction.
Tenant demand is starting to show signs of improvement over Q4 2013, with increased levels of enquiry following the resolved federal election and subsequent improvement in business confidence. In light of weak demand in the first half of 2013, net face rents recorded a negligible 0.5% growth over the same period. Looking ahead, a number of large space requirements remain active in the market. These tenants are all seeking accommodation in Prime buildings.
After a comparatively subdued first half of the year, investment activity in New South Wales gathered momentum over H2 2013, with $3.3bn invested in Q4 2013. Office investment dominated the state, accounting for 60% of the total for 2013. Interestingly, less than half of office investment was in the CBD, with the majority of the remainder being in metropolitan fringe markets.
Source : DTZ (Groupe UGL)
