Investor Presentaiton
Australian Commercial Market
Melbourne CBD office
FRASERS
LOGISTICS & COMMERCIAL
TRUST
◆ Supply: There were no new major commercial developments completed in the Melbourne CBD in 1Q21. During 2020, a total of seven new projects were completed in the Melbourne CBD
contributing approximate 329,000 sqm of net lettable area ("NLA") making 2020 the highest year for completions since 1991. There are currently five new developments and two building refurbishments
under construction in the Melbourne CBD. The developments will provide 260,270 sqm of NLA to the market and are due to be completed by 2023.
. Demand: Tenant demand in Melbourne CBD has continued to remain weak however enquiry has begun to pick up as COVID restrictions continue to ease in Victoria. During 1Q21, the
Melbourne CBD experienced negative net absorption of 56,195 sqm as tenants continued to offer sublease space to the market. Occupier demand is expected to remain subdued over the short term, as
tenants continue to assess future office space requirements. JLL expects the Melbourne market to recover throughout 2021 with leasing activity increasing throughout the year.
◆ Rents: Tenant demand in the Melbourne CBD has remained subdued over Q1 2021 and has resulted in an increase in vacancies and incentives. Over the last 12 months average net prime rents in
Melbourne CBD have increased by 1.2% to A$624/sqm. Although we note that face rents have not recovered to their pre-COVID levels. Prime incentives in the Melbourne CBD have also increased
slightly over the quarter and are currently at 34%. Despite the positive rental growth, the increase of incentives has resulted in negative effective rental growth over the quarter.
◆ Vacancy: As at 1Q21, the vacancy rate in Melbourne's CBD rose to 14.3%, being the highest level since 1999. This increase is due to a combination of weak tenant demand, increased sublease space
as well as several large tenant contractions. As at 31 March 2021, there is approximately 727,725 sqm of vacant commercial space in the Melbourne CBD. According to JLL, vacancies are expected to
peak in 2021 as new supply reaches completion and additional sublease space is offered to the market.
('000 sqm)
350
300
250
200
150
100
50
0
Melbourne Commercial Total Supply
Melbourne Prime Grade Net Face Rent
700
650
$628 $624
$580
600
$562
Jim
(A$/sqm/yr)
$515
550
$466
500
$450
$432
$417
450
$400
400
350
300
+
1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 1Q20 1Q21
1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19
1Q20 1Q21
Completed
10-year annual average
Annualised as at 1Q21
Sources: Jones Lang LaSalle Real Estate Intelligence Service - Melbourne CBD Office Final Data 1Q21; Jones Lang LaSalle Real Estate Intelligence Service - Melbourne CBD Office Snapshot 1Q21; Jones Lang LaSalle Real
Estate Data Solution - Melbourne CBD Office Construction Projects from 2Q 2011 to 1Q 2021.
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