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Research and Forecast report

Second Half 2013 Australia & New Zealand

CBD OFFICE

Negotiating the Swell


Whats in the pipeline for CBD Office tenant demand?

Accelerating success.

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Metro Office CBD OFFICE

Contents
Whats in the pipeline for tenant demand? Our CBD Office perspective CBD Office market snapshots 1. Sydney 2. Melbourne 3. Brisbane 4. Perth 5. Adelaide 6. Canberra 7. Auckland Our CBD Office experience 12 16 20 24 28 32 36 40 5 10

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CBD Office | Research & Forecast Report | Second Half 2013

Grosvenor Place, 225 George Street, Sydney Leased and valued by Colliers International

A Colliers International publication

Metro Office CBD OFFICE

Whats in the pipeline for tenant demand?


When looking at current CBD office market trends it is important to keep some perspective. The national CBD vacancy rate, at 10.1%, is in line with the long term average and Prime Grade incentives range from 15% (Perth) to 30% (Sydney). Both indicators are well below the 20% plus vacancy rates and the 40% to 50% incentive levels recorded, in some markets, during the mid-1990s.
By Mathew Tiller Associate Director | Research mathew.tiller@colliers.com
Office markets move through cycles like any other asset class. Current leasing conditions are soft however it does appear worse because we are coming from a prolonged period of low vacancy, with a record low of 3.0% achieved in 2008. Promisingly, there is not a mass of new supply in the pipeline and recent global economic news has been positive. Tenant enquiry data is starting to show signs of life and investment markets continue to see record amounts of capital looking for a home. Economic fundamentals across Australia are not in bad shape. Unemployment, while rising, remains below the long term average, GDP growth is just under trend and inflation is low. Providing room for further interest rate cuts to stimulate growth. Investment in mining and resource projects has not collapsed but simply moved from peak to sustainable investment levels. In a timely move supporting mining and other export reliant industries, the Australian dollar has depreciated significantly, since its 2013 peak of 105.89 US cents. The major concern is the ongoing record low levels of business confidence and consumer sentiment which is limiting investment, spending and growth. This in turn has reduced company revenue growth and seen businesses cut costs to maintain profitability and grow productivity. As part of these measures firms have scrutinised every expense with labour and rent costs being singled out for special attention. A reduction in average hours worked and overall headcounts, predominately through natural attrition rather than widespread redundancies, have been used to minimise labour costs. Allowing companies to in turn reduce or consolidate office tenancies, sublease unused space and in some cases move to lower grade accommodation. Businesses reluctant, or unable, to shed space have instead investigated ways to make their tenancy and working practices more efficient. This has been achieved through the reworking of office fit-outs and innovative IT systems to allow off-site access and teleworking. This has assisted productivity growth, boosting employee engagement and providing a cost benefit by reducing workspace ratios. At the same time it has resulted in fewer tenants in the market looking to expand and take on more office space. BUSINESS CONFIDENCE & CONSUMER SENTIMENT
20

150

10

Optimistic 125

100

75

-10

Pessimistic 50

-20
25

-30
Jun-10 Jan-10 Jan-13 Jan-07 Jun-07 Jan-08 Jun-08 Jun-04 Jan-06 Jun-06 Jan-05 Jan-09 Jun-05 Jun-09 Jun-12 Jun-13 Jan-11 Jun-11 Jan-12

Westpac - Melbourne Institute Consumer Sentiment Index (RHS)

NAB Business Confidence Index (LHS)

Source: NAB / Westpac-Melbourne Institute / Colliers International

CBD Office | Research & Forecast Report | Second Half 2013

How has current leasing conditions affected rents?


As expected, the demand slowdown has had a marked effect on leasing fundamentals, particularly the softening of effective rents. On the whole, face rents across CBD markets have remained relativity stable. In line with rent reviews and landlords preference to increase incentives, over reducing face rents. Nationally, CBD A Grade face rents declined by just 1%, on average, over the first half of 2013 with Perth CBD recording the largest decline, falling by as much as 5%. All CBD markets, precincts and grades experienced

12 months with the expectation that landlords have bitten the bullet early and increased incentives based on vacancy forecasts, rather than the point in time vacancy. Effective rents began their decline long before vacancy rates made any major move upwards. So while it is expected that incentives will climb over the second half of 2013, it wont be done at the same aggressive rate as the first half of the year. NATIONAL CBD A GRADE OFFICE NET EFFECTIVE RENT INDEX
5.00 4.50
Index Value (Base = March 2000)

a sharp rise in incentives over the first half of 2013, as competition to fill vacant space increased. Incentives rose by as much as five percentage points (pp) over the first half of 2013. Adelaide (5pp) and Perth CBDs (3.7pp) saw the highest growth and now sit at an average of 20% and 15% respectively. The impact of stable face rents and rising incentives has been a softening of effective rents which fell by 5.1%, on average, over the first half of 2013. The forecast is a little brighter over the next

4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Sydney

Melbourne

Brisbane

Adelaide

Perth

Canberra

Source: Colliers International

5 Martin Place, Sydney Pre-committed 13,871m to Ashurst by Colliers International

A Colliers International publication

Metro Office CBD OFFICE

567 Collins Street, Melbourne Colliers International valued and appointed to lease

Is it as bad as everyone thinks?


Despite the doom and gloom, tenant enquiry and lease transactions have still been occurring, albeit at below average levels. Recent tenant enquiry data has shown signs of life over recent months. The number of lease enquiries received was 33% higher in the first half of 2013, compared to the same period in 2012. Some of this growth can be attributed to cost conscious tenants looking to downsize or downgrade their accommodation. In terms of industry types there has been a marked rise in the number of Information Technology and Communication companies looking to relocate, making up 20% of enquires. Despite a fall in the total size of office space leased, the number of lease transactions in 1H 2013 was 4.4% higher than in 1H 2012, again driven by smaller leases and renewals. So while it remains soft for large major tenant moves, there are still savvy small and medium sized tenants in the market looking to secure a good deal.

history never repeats, we need to keep this cycle in mind when looking at broader economic factors which will drive growth over the short, medium and long term. The completion of the election, lower interest rates and softer Australian dollar are all expected to be key drivers behind the retrun of confidence and growth across the economy. Put simply, here is how the recovery could play out:

RECOVERY TIMELINE
Sept 2013 Federal election gets decided

Leads to rise in business confidence Households borrow more


RBA drops Cash Rate to 2.00% - Housing construction/ house price growth - Retail spending increases Leads to further rise in business confidence - Begin to borrow more for business investment

END 2013

1H 2014 1H 2014 1H 2014 2H 2014 2H 2014

Company revenue/ profit increases Private (business & household) investment increases Businesses look to hire more staff to accommodate growth Businesses look to expand office accommodation to fit new staff The office market recovery begins

When will demand turn around?


The big question across CBD office markets is; when is tenant demand going to return? To answer this we need to look at what occurred in previous downturns and understand which economic factors will drive growth going forward. PCA data for Australian CBD markets, as a whole, shows that since 1991, there have been three major downturns in tenant demand. None of which involved more than three six month periods of negative absorption, while the average duration of rising vacancy was just over 2.5 years. If we apply these averages to the current cycle it suggests the second half of 2014 should be more positive than 2013. While

The problem will be getting these indicators to line up, as expected, to stimulate the economy. Recent signs of growth in both the US and UK economies, the cash rate falling to 2.50% and the dollar depreciating to below USD 0.90, all provide positive signs for future growth.

CBD Office | Research & Forecast Report | Second Half 2013

Low supply pipeline to put ceiling on vacancy


We dont expect a major increase in vacancy rates, due to the lack of supply entering the market over the short term. According to the latest PCA Office Market Report, 558,637m of new and refurbished space is expected to be added to Australian CBD markets over the course of 2013. This is forecast to drop by 60%, to just 220,568m in 2014. Barangaroo in Sydney and new projects in Perth, Brisbane and Melbourne sees supply kick back up, in line with rising demand, in 2015. Subdued levels of supply, combined with the 60% commitment to new developments, currently under construction, should limit vacancy rate growth over the next 12 to 18 months.

Investors see through current leasing cycle


Despite the soft leasing environment, investment demand for CBD office assets continues to remain strong. Declining deposit rates and volatile equity markets have seen investors look to diversify their investment mix to capture higher, long term yields. The first half 2013 saw $5.7 billion worth of CBD office assets change hands, a 44% increase on the same period in 2012. This surge in sale volumes can be attributed to a rise in the number of large office portfolios on the market for sale, as well as the return to acquisition mode of domestic institutions and REITs. This saw domestic buyers make up 83% of transactions, across CBD markets in the six months to July 2013, up from 39% in 2012.
Harper Collins Publishers Workplace design, project management and tenant representation by Colliers International

CBD OFFICE MARKET - NEW DEVELOPMENTS UNDER CONSTRUCTION


100,000

2013
90,000 80,000 70,000
Office NLA (Sqm)

2014

2015

2016

2017

60,000 50,000 40,000 30,000 20,000 10,000 0

y y y e e e e th ra ra ey rne rne rra rth rth rth rth ide ane rth rne rne ney ney rth rth rth ne an ne rn an er ber ydne Per elaid Pe ydn bou bou nbe yd isb yd bou - Pe - Pe - Pe lbou lbou Syd Syd - Pe - Pe - Pe - Pe dela risb isb nb n t t St t -A t Ad e Me B Br y - t - S Mel Mel - Ca g - S - Br - S Mel 2 Ca - Ca e - S St S S S S a d t M l e t 5 e 4 y r e St tnH sS tlac St - Plac Hay ry B St - St - oo C oo C gton gton gton gton rs S ane e S n St ve dg Ave qua Ha Plac rg Bl 6 r s o ma e S s S a A e S am nP s d 999 lin lin lin lin de isb su ar ar eo uee on ution ey illi rti ollin fiel 00 ndle ter Tho ourk ollin err ea ourk ence ang ang Wel Wel Wel Wel Flin Br G s 1 Q a s r i W fl k b 0 0 r r M C an o 0 0 1 B B Sp aw stit Chi dT Ru 5 67 C Broo Cl 20 48 18 20 150 Ba , 376 , 376 , 376 , 376 50 18 Ba Ol 699 13 a L on 8 5 1C 7 1 3 4 2 3 uis 0 C KS KS KS KS 7 Lo

Vacant Space
Note: Includes developments currently under construction with office NLA above 10,00sqm Source: Colliers International

Committed Space

A Colliers International publication

Metro Office CBD OFFICE

Competition drives yields tighter


A major issue for buyers in the market is the supply of suitable assets, on or off market, for sale. This is especially true for those looking for Prime Grade assets which are traditionally tightly held, due to the low risk nature of these properties. Increased competition between purchasers has seen buyers, in some cases, offer below market yields in order to secure such assets. This has seen Prime Grade yields, across most CBD office markets, tighten by as much as 25 basis points over the first half of 2013. NATIONAL CBD PRIME GRADE OFFICE YIELD VS. 10 YEAR GOVERNMENT BOND RATE
8.0% 7.0%
(Yield, Rate and Spread)

IRRs and bond rates, the only concern for investment markets
The flow of capital into CBD office markets is expected to remain strong in the face of ongoing low interest, borrowing and deposit rates. Two issues, however, need to be kept in mind. Firstly, current leasing conditions have seen future income growth rates downgraded, leading to a softening of Prime Grade IRRs, to below 8.50% in some cases. Secondly, US bond rates have risen steadily over recent months. This may in turn see office yields across the major US office markets move upwards. While this is not expected to have a major impact, it may affect the inflow of offshore capital, as yields begin to look more attractive in the US and other offshore markets. Although this may be seen as positive, by domestic players, currently competing with offshore groups to acquire assets. Share this story

6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0%


Dec-03 Dec-04 Dec-05 Dec-06 Dec-08 Dec-09 Dec-07 Dec-10 Jun-12 Jun-04 Jun-05 Jun-06 Jun-08 Jun-09 Jun-03 Jun-07 Dec-12 Jun-10 Dec-11 Jun-13 Jun-11

Office Yield

Bond Rate

Spread

Source: RBA / Colliers International

CBD Office | Research & Forecast Report | Second Half 2013

Sep 2013

Recovery timeline
Australian Federal Election. Prime Minister elected
This will lead to improved business confidence

Dec 2013

2%

Interest Rates reach 2.00%


This will result in households borrowing more money Leads to greater business confidence Housing construction/ house prices increase Retail spending increases

Where has Tenant demand gone? Why?


Company profits and As a result companies Which leads to revenue have declined cut costs which means vacancy rates increasing demand for office space drops

What effect has soft tenant demand had on rents and incentives?
Incentives have risen Effective rents have declined

1H 2013 1H 2014 (forecast)


Auckland

3.2% 7.3%

Vacancy Rate table


Jul-13 Sydney CBD Melbourne CBD Brisbane CBD Perth CBD Adelaide CBD Canberra Auckland CBD 6.9% 7.7% 12.1% 12.3% 12.0% 11.9% 9.9% 10.1% Office NLA (m2) Jul-14 (forecast) 8.9% 9.8% 9.8% 8.6% 12.8% 12.9%
-4.5%
Perth

Net Effective Rents


-10.6%
Brisbane

0.9% 1.1%
Sydney

0.2%

-3.4% 1.4%
Adelaide

-1.7% -0.9%

3.3%
Canberra

-4.1%
Melbourne

0.3%

Is it really that bad?


Enquiry data from Colliers International tells us that there are still tenants in the market looking for space.

400,000 300,000 200,000 100,000 0 1H 2010 1H 2011 1H 2012 1H 2013

CBD Leasing Enquiries

0-999m2

1,000-2,999m2 >3,000m2

Enquiry Size Requirement Range

H1, 2014 Company revenue/ profit increases Private (business & household) investment increases Businesses look to hire more staff to accommodate growth

H2, 2014

The office market recovery begins


Businesses look to expand office accommodation to fit new staff

Future Supply is low and this will help the market


National CBD Supply Pipeline
2013 Sydney CBD Melbourne CBD Brisbane CBD Perth CBD Adelaide CBD Canberra Auckland CBD 141,692 194,092 18,600 3,105 45,234 100,511 35,700 0 0 24,500 86,609 72,000 0 22,325 2014

will Whent demand tenan n? retur

t Tenan d n a dem

he p in t ng u k c i i P leas office et r a m k

Investment market still remains strong


Buyer Type 34% REOC & REIT

Sales Transactions - Exchanged during 1H 2013


Brisbane CBD Sydney CBD Perth CBD Adelaide CBD 24% Unlisted 17% Offshore 11% Investment Manager 5% 3% 3% 3% Super Fund Other Syndicate Private Auckland CBD Canberra Number 14 17 4 3 1 2 Total Value ($) 1,671,191,200 1,372,688,000 1,230,850,000 1,221,600,000 130,100,000 103,000,000 50,550,000 worth of CBD sales took place in 1H 2013 Largest Sale: 480 Queens Street, Brisbane bought by DEXUS

Melbourne - CBD 10

$5.7 billion $543.9 million

Research and Forecast report


Second Half 2013

SYDNEY CBD OFFICE


Short term supply pipeline to put ceiling on vacancy rates
The performance of the Sydney CBD office market, during the first half of 2013, varied greatly across sectors, precincts and grades. Capital markets have gone from strength to strength, as a result of growing demand from domestic and offshore institutions, superannuation funds and private investors. In turn, an array of investment transactions have occurred, at competitive rates. The leasing market, on the other hand, has taken the brunt of fading business confidence and austerity. This has seen demand soften, driven vacancy higher and motivated landlords to offer more to entice tenants to move. The big question for the Sydney CBD office markets at present is; what will drive economic growth across New South Wales? Construction is one of the industries slated as a key driver to economic growth over the short to medium term. The ongoing low interest rate environment has increased housing affordability. This in turn is expected to see new house sales rise, driving housing construction, boosting lending activity and improving revenue for the finance and insurance sector. Early signs of activity across the residential property market have been seen in recent months. Finance commitments, for the purchase of new dwellings and construction of dwellings, increased 2.0% and 1.3% respectively, in June 2013. As the cash rate falls, the desire for capital to move, out of bank deposits, up the yield curve grows. This continues to drive investment demand from private, sub $20 million, buyers across Sydney CBD office market. Interest also remains strong from domestic institutional buyers and offshore groups, driven by positive spreads between debt costs and office yields. The major issue for the market, at present, is the lack of investment stock. Especially for secure, low risk, Prime Grade assets which are most in demand. In order to side step this supply issues issue and gain exposure to the tightly held Prime Grade market, domestic and offshore institutions have increased portfolio and fundthrough acquisitions. As offshore institutions direct capital into the investment market, the opposite is transpiring for leasing decisions from Sydney CBD based foreign companies. Budget responsibility has shifted back to home country headquarters and with it the ability for onshore managers to make leasing decisions. Tenants handing back space on renewal, increased sublease opportunities and newly refurbished backfill space have all combined to ensure a soft leasing environment over the first half of 2013. Landlords have been unable to sit out this softness and are now meeting the market with very attractive incentives, some, in excess of 30%. Its not all doom and gloom, one positive indicator moving forward is the short term supply pipeline. Two new developments , 161 Castlereagh Street and 8 Chifley Square, will complete over the course of 2013, adding 76,200m of Premium Grade supply into the market, 90% of which is currently committed. This will drop significantly with only one small, 15,000m, A Grade development set to reach practical completion during 2014. Combined with a rise in business confidence, on the back of record low interest rates and the completion of the election, is expected to provide some relief from the soft leasing environment over the year.

COLLIERS INTERNATIONAL RESEARCH FORECASTS


SYDNEY CBD OFFICE
INDICATOR JULY 2013 JULY 2014 (F)

A Grade Gross Face Rents A Grade Net Effective Rents A Grade Incentives A Grade Yields A Grade Capital Values A Grade Vacancy Rate Total Market Vacancy Rate Supply Additions (m)*

$670 $350 28% 7.35% $7,410 10.2% 8.9% 138,480

1.9% -0.3% 29% 7.15% $7,540 11.5% 9.9% 73,999

*Total market additions over 12 month period Source: PCA / Colliers International

12

A Colliers International publication

Metro Office CBD OFFICE

Leasing market
Cost drives lease activity
Cheaper space within both Prime and Secondary Grade assets has attracted the majority of enquiry and interest, over the first half of 2013. Scrutiny of accommodation budgets, by cost conscious tenants, has been a major driver behind this trend. An analysis of transactions, signed in the first half of 2013, shows that 52% of leases were in Secondary Grade buildings while 74% were for 700m or less. A positive driver for activity within the CBD has been the ongoing low vacancy rates in Sydneys metropolitan office markets. Combined with strong rental growth this has seen tenants from these markets, particularly North Sydney, look for comparable accommodation within the CBD.

order to maintain the future cash flow and capital value outlook for their assets. In some cases face rents have actually increased in line with inflation, rent reviews and outgoings. The top end of the market has experienced the largest softening of rents with the large, expensive, higher floor tenancies receiving the lowest levels of enquiry. Smaller, lower level suites within the same towers have continued to attract interest. Stable face rents and rising incentives led to a softening of effective rents, by an average of 2.7%, during the first six months of 2013. Incentives now range from 25%, for fitted out space within well leased assets, to more than 30% in buildings with higher levels of vacancy. The Premium Grade market took the biggest hit, in terms of softening effective rents, falling by an average of 6% over the first half of 2013. In line with higher levels of interest the B Grade market saw the smallest decline in effective rents, falling only 0.8% on average over the same period.

Landlords reluctant to drop face rents


The soft demand environment has continued to force incentives higher. Landlords have persisted with current face rental rates, in

Average enquiry size falls


Enquiry volumes across the Sydney CBD leasing market have remained relatively steady with circa 200,000m of enquiry, during the first half of 2013. Despite this, the average enquiry size fell 47%, from 1,380m in the second half of 2012 to 730m over the first half of 2013. The Business Services industry continues to dominate, making up 26% of enquiry levels. Signs of life in the Finance sector have also begun to emerge with a four percentage point rise in enquire volumes, over the start of 2013.

Demand to turn around over 2014


Current rent, incentive and tenant demand trends are expected to remain in place over the remainder of 2013. Sub-lease space and newly refurbished backfill stock, coming into the market, continues to pose the biggest threat to rising vacancy rates. Subdued economic conditions across NSW, since the GFC, has seen businesses struggle to grow their revenue base. This has led to the implementation of cost cutting strategies, reducing staff, to boost profitability and productivity. Low borrowing and financing costs are expected to see firms begin to move from austerity to investment, in order to boost growth. This in turn is expected to have a positive effect for employment markets and office demand. SYDNEY CBD ENQUIRIES NUMBER OF ENQUIRIES BY SIZE RANGE
100 90 80 70 60 50 40 30 20 10 0
Q3 2012 Q4 2012 Q1 2013 Q2 2013

500sqm or less

501-1,000sqm

1,001sqm or greater

161 Castlereagh Street, Sydney Valued on behalf of The GPT Group and ISPT

Source: Colliers International

CBD Office | Research & Forecast Report | Second Half 2013

13

Investment market
Investment demand remains strong
The influx of capital chasing CBD office assets continues with demand for core investment assets outstripping supply. The first half of 2013 saw $605 million (excluding portfolio sales) worth of investment transactions take place within the Sydney CBD office market, a 6% rise on the same period in 2012. A buoyant second half of the year is also expected with the $317 million, 50%, sale of 200 George Street by AMP, taking place in the first two weeks of July. Domestic institutional buyers have ramped up acquisitions, making up 67% of transactions in the first half of 2013. Offshore capital also remains strong making up 24% of sales, up from 19% in the first half of 2012. This is expected to rise over the second half of the year with Credit Suisse, reportedly, purchasing 400 Kent Street for $58 million in August.

Portfolio sales dominated by domestic buyers


The positive start is even stronger if portfolio sales are included into the mix. Portfolio transactions, containing Sydney CBD office assets, rose over the past six to 12 months. The first half of 2013 saw Sydney CBD office assets worth $499 million change hands as part of portfolio sales. The acquisition of these assets has turned from being dominated by offshore groups, in 2012, to domestic institutional buyers. This trend started in December 2012 with DEXUS acquiring a, three asset, portfolio from the Direct Property Investment Fund (DPIF) for $530.7 million. This included two CBD office assets being, a 25% interest in Grosvenor Place for $271.25 million and 39 Martin Place for $143 million. This was followed by the first tranche of office assets sold by GE Real Estate. These were purchased by Mirvac for $584 million in May 2013 and featured five Sydney CBD properties worth $183 million. Then in June 2013, the NSW Government sold a portfolio of office assets to Cromwell for $405 million, including three CBD properties worth $316 million.
10 Barrack Street, Sydney Sold on behalf of Blackrock Investments Management

Sales evidence yet to show tightening of yields


Low deposit rates, falling global office yields and the wide spread between yield and bond rates have all been talked about as drivers behind tightening yields. It is widely expected that if a trophy Premium Grade tower came to market for sale, the weight of capital chasing such an asset would see the sale reflect this. However, as virtually all sales transacted to date in 2013 have been A and B grade assets, combined with the soft leasing market, we have not yet seen evidence of yield compression. That said looking forward, yields for Prime Grade assets are expected to tighten slightly over the next 12 months, however falling net effective rents will limit the size of this compression. SYDNEY CBD INVESTMENT SALES BY BUYER TYPE
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 H1 2013

Lack of core investment stock limits turnover


The level of transaction activity, concluded to date in 2013, would have been higher had there been more core investment grade stock for sale. High quality, Prime Grade assets with long secure lease covenants, are the investment preference for the majority of buyers. However, there are limited, on or off market, opportunities to purchase these assets, due to their tightly held nature. This has seen core buyers begin to move up the risk curve and look at Secondary Grade assets. However, these assets need to have low leasing risk and capital expenditure requirements and be well located to attract interest.

Institutional Private

Foreign Other

Corporate / End User

Note: Includes portfolio sales Source: Colliers International

14

A Colliers International publication

Metro Office CBD OFFICE

Supply, vacancy & demand


Lack of supply till 2015
One positve factor for the Sydney CBD offfice marekt moving forward is the constrained supply outlook, over the short term. Over the last 10 years the market added an average of 138,778m of new supply every year. The 2013 calendar year is expected to see 119,582m before dropping 28% to 85,155m in 2014, 36% of which is committed. This low supply will assist in placing a ceiling on rising vacancy rates, over the next 12 to 18 months, before the new supply cycle kicks in over the course of 2015.

January 2013 to 8.9% as of July 2013. A combination of factors drove this large growth. New supply additions totaled 90,843m for the six month period. Including, 161 Castlereagh Street (ANZ Tower), refurbished space at 1 OConnell Street and 363 George Street. A near doubling of sublease space from 13,603m in January 2013 to 32,142m in July 2013 also contributed to the growth in vacancy. The first half for 2013 also saw absorption turn negative for the first time since January 2010. The movement of tenants due to the completion of ANZ Tower was key to this absorption result. This saw Premium Grade absorption increase 36,393m thanks to the movement of Freehills and ANZ into the building from A and B Grade space. A Grade absorption was -27,846m for the first half of 2013, because the PCA counts the current Freehills space at MLC as vacant at the time ANZ Tower reached PC. B Grade absorption was -27,070m for the period chiefly due to the withdrawal of the 20 Martin Place.

Backfill and sublease the biggest threat


The biggest driver pushing vacancy higher, over the next 12 months, will be sublease and refurbished backfill space coming back into the market. The delivery of ANZ Tower in the first half of 2013 will see ANZ move out of 20 Martin Place. This will have little initial impact on the market, as Pembroke intend to withdraw this space and undertake a full building refurbishment. The movement of Freehills into ANZ Tower is expected to see their current space at MLC Centre come back into the market in the first half of 2014 after short term refurbishment. The movement of Quantium and Corrs Chambers Westgarth into 8 Chifley Square is also expected to see backfill space enter the market over the second half of 2013.

Southern precinct remains tight


The Southern Precinct was the strongest market across Sydney CBD over the first half of the year. This was the only region which saw overall vacancy remain stable, at a low 4.4% while A Grade vacancy fell to 0.8%, or just 960m. Colliers International forecasts demand to remain soft, over the remainder of 2013. Vacancy is expected to rise to 9.8% as of July 2014, before leveling out, as demand begins return, over the second half of 2014 and into 2015.

Vacancy rises due to sublease and supply


The July 2013 PCA Office Market Report showed that vacancy across Sydney CBD rose 1.7 percentage points, from 7.2% in

SYDNEY CBD OFFICE MARKET NEW DEVELOPMENT PIPELINE


110000 100000 90000
Total Office NLA (m)

2013

2014

2015

2016

2017+

80000 70000 60000 50000 40000 30000 20000 10000 0


ula rQ ua -3 y 5 Bl 3 igh G St 33 eor -3 ge 5 Pi St & t 37 t St -5 28 1P 9itt 30 St 7 Ge or ge St 33 18 St C5 C4 kS C3 St St St St yS n AX (IM bb on ge gh ge oo oo ifle Yo r rti om 1P oo Ge or Ge or ea en lar 1C 15 AM P ce as itt St Ci Pl q ) Th e Ri t

tle r

ng

ng

40

Th

ng ar

Ch

Ma

ar

ar

-3

19

ra

ra

as

20

33

16

1C

Ba

Complete

Ba

18

New Build / Vacnat

Ba

Mooted

ra

Commitment

rc

Source: Colliers International

Australian Bureau of Statistics Project Management by Colliers International

How else can we help you? Speak to one of our property experts today. au.office@colliers.com

For further information about our research please contact: Mathew Tiller Associate Director | Research | Tel +61 2 9257 0348 mathew.tiller@colliers.com

CBD Office | Research & Forecast Report | Second Half 2013

15

Research and Forecast report


Second Half 2013

MELBOURNE CBD OFFICE


Melbourne CBD cements its position as an active target for global capital
It is well known that the Sydney and Melbourne CBD markets are the two most popular destinations in Australia for offshore investment. Whilst Sydney is generally favoured due to it being the financial capital of Australia, Melbourne has proven to be just as popular, given it is the second largest market and offers a capitalisation rate premium to Sydney. Whilst in Melbourne the most active buyer group for large-scale assets has been the REITs and unlisted wholesale funds, offshore investors are still featuring prominently, accounting for an interest in two (2) transactions over $100 million in 2013. Offshore investors are expected to represent the buy-side of more transactions in the second half and may end up the dominant buyer group in Melbourne for the full 2013 calendar year. Australia is now attracting a higher portion of the Asia Pacific allocation of global investors and funds. When comparing the return and risk profile of major cities within Asia, investment into Australia, is very compelling. With capitalisation rates for stabilised prime grade office product in the 6.5% to 7.5% range and the cost of the debt under 5%, there are opportunities for investors to make accretive purchases, something that is not as easily available in other globally competitive cities. The largest proportion of offshore capital for core, prime grade Melbourne assets continues to come from Asia. Singaporean groups, such as K-REIT who purchased 50% of 8 Exhibition Street in June 2013 and Malaysian pension funds have been the most active. The next wave, however, is expected to come from Korean pension funds and Chinese sovereign wealth and pension funds. The capital activity of European investors in Australia is a reflection of the state of European nations economies, with the bulk of capital coming from Germany and Switzerland. A recent example is a German pension fund which acquired 575 Bourke Street for $70 million in April 2013. While just over 75% of the $1.07b of Prime Grade stock transacted in Melbourne over the first half of the 2013 calendar year has been attributed to local REITs and unlisted funds, it is largely as a result of capital inflows from offshore, as global pension and sovereign wealth funds account for a large portion of the investment into domestic balance sheets and unlisted funds, along with capital from Australian super funds. Whilst domestic fund managers have become more active, the demand for direct investment from offshore investors has not waned and, if anything, is growing. Investment from Singapore, Malaysia, Germany and Canada is expected to continue, and will be reinforced by greater amounts of capital from Korea, China and South Africa.

COLLIERS INTERNATIONAL RESEARCH FORECASTS


MELBOURNE CBD OFFICE
INDICATOR JULY 2013 JULY 2014 (F)

A Grade Net Face Rents A Grade Net Effective Rents A Grade Incentives Total Market Vacancy Rate A Grade Yields A Grade Capital Values (per m) New Supply Additions (m)*
*Total market additions over 12 month period Source: PCA / Colliers International

$429 $305 29% 9.8% 7.00% $6,250 240,811

0.0% -1.3% 30% 8.6% 6.85% $6,500 26,471

399 Lonsdale Street, Melbourne Managed on behalf of FKP Property Group

16

A Colliers International publication

Metro Office CBD OFFICE

Leasing market
Tenant demand hurt by lack of business confidence
The Victorian economy, by most measures, has slowed since last year. However, Victorian Gross State Product (GSP) still grew by 2.3% over 2012/13, and is forecast to continue to grow over the five (5) year forecast period, albeit at modest rates in the short term. Victorian infrastructure, despite having its own share of issues, is seen as better than that in the remainder of the country, and both overseas and internal migration inflows to Victoria are still very strong. Nevertheless, business sentiment is flat, with results from the latest VECCI-Bank of Melbourne Survey of Business Trends and Prospects indicating that the expected performance of the Victorian economy over the year ahead remained weak and at a similar level to that reported in the previous survey. In terms of office demand the survey provided some more upbeat results, with the finance, property and business services sectors the only industries reporting positive business conditions over the June 2013 quarter. The good news is that white collar employment growth in the

Incentives doing their job, activity in the market has picked up as a result
Incentives for A Grade office space in Melbourne now average about 28%, and we expect this figure to creep up to 30% by the end of 2013. These incentive figures are averages, and it should be noted that the incentive offered by a landlord will be very dependent on their individual assets vacancy profile. The incentives currently being offered in the market, as well as the availability of good quality, contiguous floors, are encouraging tenants to review their space requirements and take advantage of some exceptional deals that are on offer. Colliers is aware of a number of major lease transactions that are currently under negotiation for these very reasons. While we are forecasting a further, minor, drop in effective rents for the remainder of the year, any letting up of some major vacancy in the market could see the average incentive figure move in the opposite direction, as landlords are under less pressure to let up remaining space. MELBOURNE CBD WHITE COLLAR EMPLOYMENT
350,000 300,000 250,000
Persons

8.0% 7.0% 6.0%


Annual Chnage

Melbourne CBD has still been growing. It is forecast to continue to grow by an average of 2.00%, or about 5,800 workers per annum, according to forecasts provided by Deloitte Access Economics. This equates to around 80,000m of office demand each year. While some of this demand will be absorbed into existing underutilised space, some tenants will choose to take this opportunity to expand into suitable premises and take advantage of the relatively generous incentives that are on offer.

5.0% 4.0% 3.0% 2.0% 1.0%

200,000 150,000 100,000 50,000 0


Jun-00 Jun-20 Jun-02 Jun-04 Jun-06 Jun-08 Jun-05 Jun-09 Jun-22 Jun-03 Jun-07 Jun-10 Jun-01 Jun-21 Jun-12 Jun-14 Jun-16 Jun-18 Jun-15 Jun-19 Jun-13 Jun-17 Jun-11

0.0% -1.0%

White collar actual (LHS)

White collar Annual % Change (RHS)

Source: Colliers International, Deloittes Access Economics

699 Bourke Street, Melbourne Leased on behalf of Mirvac Group

CBD Office | Research & Forecast Report | Second Half 2013

17

Investment market
Longer term, leasing market indicators still attractive to investors
While the Melbourne CBD office market has experienced a period of rental declines, the majority of the decrease in effective rents that we are forecasting has already occurred. Over a 10 year investment timeframe, there is certainly significant upside income opportunity that investors buying into the market can take advantage of. Further, once the current cycle of new developments under construction are delivered, the supply side outlook is also favourable. Typically, the recovery of secondary grade assets lags that of the prime grade market, and we expect the same pattern to occur in the Melbourne CBD. These assets typically form only a small proportion of the target asset mix of offshore capital and local wholesale funds, but are increasingly popular with private investors and syndicates. As the bottom of the leasing cycle for the secondary market approaches, towards the latter half of 2015, we expect more transactional activity in this sector.

Tokyo and Seoul, are still seen as very generous. On all measures, Melbourne will remain a low risk market, and for this reason we expect global capital inflows to remain high. This will result in further yield compression, and we expect another 25bp compression in the near term.

Offshore interest to continue growing, but are currency fluctuations a factor?


Currency fluctuations do not affect buyer sentiment, activity and pricing in the way one might expect. Instead, the impact is dependent on a number of factors, including the origin, type and size of the capital source. In the case of the worlds largest investors, because they are invested largely in all regions and asset classes globally, they have natural hedges that mean losses due to currency movements in one region will be offset by gains in another. Because currency movements (AUD v USD) only impact a minority of offshore investors, movements generally do not have a material impact on overall demand and pricing of offshore investors. NET EFFECTIVE RENTS, HALF YEAR % CHANGE
15%

Further yield compression expected


% change

10%

Global investors looking to place capital in commercial property normally look for markets that present a low geo-political risk, and over the long term display balanced supply and demand metrics. In all respects, Melbourne meets these criteria. Market cap rates for A Grade Melbourne assets have compressed to a range of 6.40% to 7.25% over the first half of 2013 on the back of some major transactions, and compared to some of the other major low-risk Asian destinations, such as Hong Kong, Singapore,

5%

0%

-5%

-10%

-15%
Ju l-0 Ja 3 n0 Ju 4 l-0 Ja 4 n0 Ju 5 l-0 Ja 5 n0 Ju 6 l-0 Ja 6 n0 Ju 7 l-0 Ja 7 n0 Ju 8 l-0 Ja 8 n0 Ju 9 l-0 9 Ja n10 Ju l-1 0 Ja n11 Ju l-1 1 Ja n12 Ju l-1 2 Ja n13 Ju l-1 3 Ja n14 Ju l-1 4 Ja n15 Ju l-1 5 Ja n16 Ju l-1 6 Ja n17 Ju l-1 7 Ja n18

Prime Grade

B Grade

Source: Colliers International

18

A Colliers International publication

Metro Office CBD OFFICE

January 2013. As the vast majority of this new supply was precommitted, the relatively large jump in vacancy can be explained by the associated backfill space from a number of these tenant moves. Major Melbourne occupiers such as NAB, CBA, Mercer, BHP and Service Stream all commenced occupancy in their new offices, and left behind an estimated 80,000m of backfill space. Some of this space is already committed, such as Mercers 11,800m backfill at 11 Exhibition Street by BUPA, while other space is likely to be taken out of stock and refurbished, including 555 Collins St, which NAB is to fully vacate as part of their move to 700 Bourke Street. Given that there are no major new buildings being completed or very large backfill premises being vacated over the next 12 months or so with the exception of Cbus Propertys 720 Bourke St we expect the vacancy rate to decline over 2014, and are forecasting the vacancy rate to be back down to 8.6% by July 2014. There are also a number of major deals in the pipeline that
313 Spencer Street, Melbourne Sold on behalf of CBUS Property

will add to net absorption over the remainder of this year and into 2014, including 5,600m which is currently under offer at 171 Collins Street.

Supply, vacancy & demand


All new supply for 2013 now completed
Over the half year to June 2013, Melbourne has seen four (4) new or refurbished A Grade buildings totalling 165,000m added to the market. Just over 140,000m of this new supply has been pre-committed. Further supply will be added to the market over late 2014 and 2015, when 167,000m will complete, and at this stage 66% of this new supply is pre-committed. The largest of these is 567 Collins Street, which is due for completion in August 2015. For the remainder of 2015, we see minimal opportunities for further large pre-commitments to kick-start a new development. The consequence of this is that tenants looking for large, contiguous floors in quality A Grade buildings should start considering their options now, as the supply of new stock gradually dwindles. Year to date, the Colliers International CBD leasing team have received 158 enquiries for 132,606m of office space.

Next pre-commitment/supply cycle to commence 2016/17


While we are forecasting vacancy to rise to 10.1% by late 2015, much of this rise will be a result of lower quality backfill space returning to the market. Just as the current supply cycle comes to an end in 2015, we also expect the demand side of the equation to recover. This will cause net effective rents to rise over 2015, as the market prices in a lower vacancy outlook. For tenants, this means that the remainder of 2013 and 2014 will be the most opportune time to negotiate a new deal and take advantage of the tenant-friendly conditions. Looking forward, Colliers Internationals CBD leasing team are aware of almost 190,000m of leases greater than 5,000m coming up for expiry over 2016 and 2017. We expect one or more of these tenants to kick start the next supply cycle in 2016/17 via a pre-commitment. LEASE EXPIRIES > 5,000m
120,000

100,000

112,091

80,000

60,000

76,769 66,358

Vacancy to peak in 2015, although with some upside risk


Following completion of 165,000m of office space over the first half of 2013, the vacancy rate has climbed to 9.8%, from 7.0% in

40,000

20,000

Title Insert text here 0

28,835

2015

2016

2017

2018

Source: Colliers International

How else can we help you? Speak to one of our property experts today. au.office@colliers.com

For further information about our research please contact: Anneke Thompson Associate Director | Research | Tel +61 3 9940 7241 anneke.thompson@colliers.com

CBD Office | Research & Forecast Report | Second Half 2013

19

Research and Forecast report


Second Half 2013

BRISBANE CBD OFFICE


Robust investment market unsupported by subdued leasing environment
The Brisbane CBD office leasing market experienced a significant softening during the first half of 2013 (H1 2013). Withdrawals from the State Government, waning confidence in the resource sector and subdued business confidence, all contributed to weak tenant demand. This moderation in performance was not limited to the Brisbane CBD with all major capital cities recording negative net absorption. Brisbane however, accounted for over half of the national decline in occupied stock. Counter-intuitively, Brisbanes capital market, unsupported by leasing fundamentals has been strengthening in the past year, a signal of continued confidence from investors with long term hold strategies. The A-REIT sector has returned to growth since mid-2011 with the ASX S&P 200 A-REIT index showing an 11.3% annualised three year total return. The resultant effect has been a shift into an acquisition phase, accretive to earnings. The increase in activity from institutions has led to upward revisions in pricing in order for buyers to secure transactions. Rising US Bond rates could see further reweighting of asset portfolios to increase exposure to commercial property. Subsequently the top end of the market may see continued purchasing activity from the A-REITs and foreign entities. Dynamics within the leasing market are now more than ever, weighted in the tenants favour. Face rents have not experienced considerable growth while incentives continue to be adjusted higher in order to secure rental streams. Incentives have increased between 2.5% and 5.0% over the first half of the year, resulting in a downward shift for effective rents. This negative growth trend is expected to continue through the second half of 2013 and potentially through 2014, albeit to a lesser extent. Although the market is not expected to see any new project deliveries prior to H2 2015 at the earliest, any unanticipated uplift in demand will be absorbed by existing vacancies without placing upward pressure on rents. A significant increase in available sublease space has presented occupiers with more opportunities when negotiating a new lease. In some cases, it may now be feasible for secondary grade tenants to move into A or premium grade space as sub-lessors look to recover some occupancy costs. Our research shows there is approximately 72,000m available in the sublease market, 58% of which is currently vacant. The rental spread on direct and sublease areas has grown in 2013 with an average discount to market of 30% across all grades in the CBD, further highlighting secondary tenant accommodation opportunities. In the near term, we anticipate continued softening in the leasing market with additional Qld State Government consolidation and underwhelming estimated growth in mining. However, forecasts by Deloitte Access Economics (DAE) suggest office based employment may see a positive growth scenario following the most recent contraction, albeit with continued losses in the public service and resource sector. Outsourcing of State Government functions may be one reason behind an increased demand from some sectors. DAE forecasts also show Queensland economic growth to outpace national GDP growth.

COLLIERS INTERNATIONAL RESEARCH FORECASTS


BRISBANE CBD OFFICE
INDICATOR JULY 2013 JULY 2014 (F)

A-Grade Gross Face Rents A-Grade Net Effective Rents A-Grade Incentives Total Market Vacancy Rate A-Grade Grade Yields A-Grade Capital Values Vacant Supply Additions (m)*
*Total market additions over 12 month period Source: PCA / Colliers International

$668 $336 27.5% 12.8% 7.50% $7,250 6,600

0% -1.36% 32.5% 12.9% 7.25% $7,350 0

20

A Colliers International publication

Metro Office CBD OFFICE

Leasing market
Leasing volume falls
Major withdrawals and subdued tenant demand culminated in 64,069m of negative net absorption recorded during H1 2013 across all grades. While the withdrawals were negated by the delivery of 18,600m of fully committed new supply, the State Government exit, backfill associated with previously completed new developments and the release of vacant sublease space placed upward pressure on vacancy, well above previous expectations. Regarded as the most active participant of the leasing market, the energy and resources sector accounted for a quarter of absorption in the two years to mid-2013. H1 2013 illustrated the softening within the sector, with a contribution of circa 2% to lease volumes. The transport, logistics and postal services sector combined for a 40% share of leasing volumes with Boeing taking 7,500m in 150 Charlotte Street and Aurizon signing on for 2,800m at 192 Ann Street. Notably, the quantum of lease transactions was approximately half the H2 2012 total.

Where will tenant demand come from going forward?


According to the latest figures from Deloitte Access Economics (DAE), there was an estimated 3% net decline in CBD office based employment over the first six months of 2013, largely attributable to State Government redundancies. The finance and utilities sectors (gas, electricity, water and waste) also recorded a large contraction in job numbers. DAE forecasts suggest office based demand for white collar employment will return to a moderate level of growth in the second half of 2013. The public sector is forecast to see a continued decline in white collar jobs. Mining and agriculture could also expect to see further reductions of approximately 8% in the six months to December. While the public sector and mining may see further contractions, other sectors are expecting a return to growth. The professional and technical services in combination with financial and insurance firms could see office based demand regain some traction in the second half of the year. SUBLEASE AVAILABILITY BY SECTOR
6% 9% 7% 4%

Incentives yet to reach their peak


Face rents have seen minor corrections over the last six months with prime grade rents declining approximately 1% on average while secondary assets experienced falls of 2% on average. Assets owners have largely avoided face rental adjustments to protect capital values; however incentives have increased in order to secure tenants and an incoming cash flow. Incentives are at their highest level in 15 years for prime and secondary space, with values in the order of 27.5% and 35% respectively. Forecasts suggest the leasing environment is not expected to improve markedly in the second half of 2013. While face rents may see slight downward revisions, incentives are yet to reach their peak. This will continue to place downward pressure on effective rents, with an anticipated decline of 3% - 4% on average, across the market over the next 12 months. Secondary effective rates may see greater reductions in H2 2013.
Legal & Acconting Technical Services 44% 10%

20%

Finance & Insurance Services IT & Telecommunications

Government Other

Mining & Energy

Source: Colliers International

Vacant sublease space doubles in six months


Analysis of all available sublease areas suggest there is approximately 42,041m of vacant sublease space available in the Brisbane CBD, an increase of 23,399m in 6 months. Our research indicates there is a further 26,218m available which would remain occupied until completion of a deal. Sectors responsible for the majority of sublease on the market are the Mining and Energy (44%), State and Federal Government (20%) and Technical Services (10%). Resource project deferrals and the handing back of surplus expansionary space from precommitments were co-contributors to the increase in sublease offerings, the latter accounting for 8% of the total.
Waterfront Place, 1 Eagle Street, Brisbane Leased on behalf of Future Fund (CorVal Partners) and Stockland

CBD Office | Research & Forecast Report | Second Half 2013

21

Investment market
Counter cyclical investment
The Brisbane investment market has been in a counterintuitive strengthening phase, unsupported by leasing fundamentals but rather broader economic drivers. As economic forces place downward pressure on risk premiums, Investment portfolios have been reweighted in order to gain greater exposure to higher yielding assets such as equities and commercial property, particularly prime grade CBD assets. During H1 2013 there were seven transactions involving 14 assets with a total value of $1.61 billion. As illustrated opposite, the market has seen a resurgence in activity from institutional purchasers, namely A-REITs and domestic funds.

Domestic institutions reweight to include Brisbane CBD office


Queensland Investment Corporation (QIC) accounted for the largest quantum of investment through its purchase of a seven asset portfolio from the Queensland State Government for $561.9 million or 35% of the total volume. Dexus Property Group and the Dexus Wholesale Property Fund partnered to acquire Grocons 480 Queen Street development for $543.9 million. While institutions dominated the investment landscape with 86% of transaction, other buyer types were not absent. The South Australian government, through the Motor Accident Commission purchased a half share in 400 George Street for $195.8 million.

Some evidence of prime yield compression


Increased competition for prime assets in the Brisbane CBD has led to a slight uplift in capital values and some yield compression, particularly in prime grade assets showing lower risk profiles compared to secondary grade buildings in which vacancy has increased significantly. The half sale of 400 George Street (A-grade) showed a reversionary yield of 7.06% with an average yield spread of 7.00%-8.00% across A-grade. Premium yields remain between 6.75% and 7.50% while B-grade properties were also unchanged with an average spread of 9.00%-10.00%. The reduction of bond rates and continued monetary easing by the RBA is also placing downward pressure on internal rates of return.

QLD Government disposals


The vendor profile during H1 2013 was weighted towards the Government (35%) followed by Corporates (34%), Institutions (16%), Foreign (11%) and Privates (4%). As a continuation of Grosvenor Internationals repositioning of offshore capital, the overseas fund divested their interest in 259 Queen Street with Investa using their listed Commercial Property Fund to acquire the A-Grade asset. The asset is 32% leased to the Bank of Queensland who have agreed to move a new premises in the Brisbane Fringe.

Investment pipeline
Brisbane CBDs investment market momentum is expected to continue through the second half of 2013, particularly if economic fundamentals remain supportive of yield stability. A number of prime and secondary grade assets are expected to transact in the next 12 months with institutional, foreign, and to a lesser extent, private domestic buyers all active participants. With the Australian Dollar approaching the US$0.90 mark, reduced currency hedging costs appear more supportive for ongoing and possibly increased investment from offshore purchasers. BRISBANE CBD INVESTMENT SALES BY BUYER TYPE
5% 5% 9% 11% 20% 2%

22% 52% 45% 86%

53% 35% 29%

4% 2010 Sydicate Private

6% 2011 Foreign

5% 2012 Institution Corporate

12% 2013 YTD Government

400 George Street, Brisbane Valued on behalf of Grosvenor International and HSBC Trinkaus

Source: Colliers International

22

A Colliers International publication

Metro Office CBD OFFICE

Supply, vacancy & demand


Withdrawals lead to bounce in vacancy
The latest PCA Office Market Report indicates the total market vacancy increased to 281,647m, reflecting a rate of 12.8% in July 2013. This is well above previous forecasts of circa 11% with net absorption of -64,069m. In terms of historical office vacancy, the current rate sits 3.8% and 6.7% above the 5 and 10 year averages respectively. The lift in vacancy is largely attributable to the B-grade market which saw 59,801m in negative net absorption. This decline in occupied space led to B-grade vacancy increasing from 6.3% to 17.0%. The State Government withdrawal accounted for a significant proportion of this total, with further negative contributions expected over the following 12 months. In general terms, the prime and secondary vacancy rates were recorded as 9.4% and 16.1% respectively. Looking ahead, Colliers International research forecasts suggest the vacancy rate may increase to between 13.25% and 13.75% in January 2014 before some slight downward movement in July 2014.

Clarity on supply outlook


Following previous reports in which the timing of future projects was uncertain, improved clarity on Brisbanes new supply pipeline has allowed for a firmer market outlook. At the time of writing, the three confirmed and proceeding developments, 180 Brisbane (Daisho), 480 Queen Street (Dexus/Grocon) and 1 William Street (QLD Government/Cbus) were circa 50% pre-committed, however 15,000m of sub-lease space has been placed on the market in the State Governments new executive building. Assuming a conservative level of absorption prior to delivery, research does not indicate significant upward pressure on the vacancy rate upon completion of these projects. While the market has generally absorbed much of the recent new supply, it may be challenging for confirmed projects to achieve desired levels of pre-commitment prior to completion. With a general flight to quality trend in tenant demand, the prime market may be better placed to experience stabilising rents and lower vacancy. The secondary market, in particular B-grade buildings may be facing a more challenging 12-24 months in absorbing some 120,000m of vacant space.

Leasing competition on multiple fronts


Landlords with significant levels of direct vacancy in their assets may face a challenging leasing environment in the near term with circa 70,000m of sublease space currently in the market. Tenants across all grades are now presented with more opportunities as companies look to reduce inefficiencies by subleasing surplus space. The result is discounted rents to the point where tenants may now have the option of taking a sublease in a higher quality building, albeit for a shorter term. In order to remain competitive and secure tenants, secondary assets will be under increased pressure to refurbish and reposition their property. BRISBANE CBD CURRENT & MOOTED COMMERCIAL DEVELOPMENT
80,000 2013 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0
Br isb a ba c ba c ba c Ma ry S ith d Ce nt re Tr Br isb a ne an s it kfi ll t To we r wa l kfi ll kfi ll ne et et re e re re re tre rt S eC ou re m Re g St ra St St St ite et et

Supply gap
The delivery of the Australian Taxation Offices new Brisbane headquarters at 55 Elizabeth Street signals the end of the latest development cycle, with 2014 expected to be the first year since 2007 when no major new projects will be completed. Although the developer of 180 Brisbane, a 57,000m prime tower has signalled its intention to complete the project by H2 2015, it could be that the market does not see any significant new supply until 2016. Following 180 Brisbane, Grocon and Dexus anticipate their premium tower at 480 Queen Street will reach completion in H1 2016. Cbus and the Queensland State Government have begun construction on a new 75,000m prime grade building in the CBD government precinct with an expected delivery date of H1 2017.

2014

2015

2016

2017+

Total Office NLA (m)

et h

am

en

en

Co m bin ed

Co m bin ed

m bin ed

Qu e

Qu e

tW

18 0

Eli za b

1W illi

Go v

48 0

55 0

Co

111

Complete

New Build / Vacnat

Refurbishment / Associated Backfill

Mooted

Fm rS up

55

St

ate

Committed

State Govt Backfill

Source: Colliers International

How else can we help you? Speak to one of our property experts today. au.office@colliers.com

For further information about our research please contact: Alex Beer Research Analyst | Research | Tel +61 7 3026 3305 alex.beer@colliers.com

en t

CBD Office | Research & Forecast Report | Second Half 2013

23

Research and Forecast report


Second Half 2013

PERTH CBD OFFICE


CBD office market remains resilient
While there is a widespread acceptance around the country that the peak of the mining boom and resource sector-related project investment in Australia has passed, confidence levels in the property sector in WA remain relatively robust. The Perth market has seen slowing conditions over the past 12 months however, the fundamentals remain strong. While we have seen a pullback in resource sector project investment and subsequent job shedding in the engineering and technical services sector, Perth is coming off a 12 month record high in net absorption and critically low vacancy and stock levels; and the current results reflect a necessary cyclical correction in the market and a return to more normal conditions. A slowing of activity in the mining sector has meant there are now more options for tenants to secure office space. While very little new space will be completed until the second half of 2015, there are options for tenants to pre-commit to new buildings and we have already seen some tenants make this choice. Vacancy in the Perth CBD continues to be tight at 6.9%. Sublease space, which began to rise in the latter part of 2012, has moved up only marginally to 2.5%. Direct vacancies primarily in the non-premium end of the market account for much of the vacancy increase as shown in the PCA figures. The Bureau of Resource Energy and Economics details more than $220 billion in committed and feasibility stage projects for WA. While research shows a tapering of project investment, Perth is beginning to demonstrate a durable, resource-related knowledge sector workforce which will continue to underpin office demand over the long term. Indeed, Deloitte Access Economics is forecasting an (albeit marginal) increase in CBD and West Perth white collar employment over the short to medium term. Evidence of the robustness of the Perth property market can be found in recent announcements on the go-ahead for Brookfield Stage 2, the sale of Raine Square to Charter Hall and Dexus purchase of the King Square developments. These results are a vote of confidence in the fundamentals of the Perth office market for the long term. Net absorption has continued the negative trend that began in the second half of 2012 with a further 12,504m negative figure in the first half of 2013. A Grade face rents are presently averaging $715/m with incentives averaging around 12.5%, although some softening of face rents is anticipated second half of 2013 and into 2014 with the incentive range moving to 12.5% to 17.5%. Subject to current supply and demand forecasts, a stabilisation and recovery may start to occur towards the end of 2014.

COLLIERS INTERNATIONAL RESEARCH FORECASTS


PERTH CBD OFFICE
INDICATOR JULY 2013 JULY 2014 (F)

A Grade Net Face Rents A Grade Net Effective Rents A Grade Incentives Total Market Vacancy Rate A Grade Yields A Grade Capital Values Total Supply Additions (m)*
*Total market additions over 12 month period Source: PCA / Colliers International

$715 $625 12.5% 6.9% 8.13% $8,500 13,075

0.0% -2.8% 15.0% 7.7% 8.13% $8,500 7,012

24

A Colliers International publication

Metro Office CBD OFFICE

Leasing market
While CBD vacancy rates have risen over last 12 months from 4.6% to 6.9%, it is important to note that this rise came against the backdrop of critically low vacancy rates and the introduction of significant new supply through 2012. Rather than reflecting any substantive weakness in the Perth office market, the rise in vacancy is more likely a rebalancing of an overheated market which Colliers International expects will continue to trend back to a longer-term average profile. Despite the increase in vacancy and rise in negative net absorption, Perth remains the best-performing capital city in

Colliers International expects CBD vacancy rates over the next six months to increase from the current 6.9% to a year-end estimate of low to mid 7%, with the likelihood of further increases to by mid-2015. Face rents for A and B Grade will come under pressure with the first response of landlords to offer greater incentives. Subsequently, the expectation is for some short term softening of face rents with potential for rising incentive levels. It is however, anticipated that in the medium term further resource sector investment and continued population growth will underpin improved office demand. PERTH CBD AVERAGE NET FACE RENTS
$1,000 $900 $800
Net Face Rent ($/m)

Forecast

terms of vacancy. The Perth CBD vacancy rate of 6.9% is notably lower than Sydney (8.9%), Melbourne (9.8%) or Brisbane (12.8%), and is a mark of the confidence, strength and resilience in the Perth market. The vacancy rate is at the lower end of market expectations prior to the release; however there is hidden sublease vacancy (although technically classed as occupied) which suggests that the actual availability of space may be higher than the official vacancy rate. Perths net absorption to July 2013 (-12,504m) was less than 20% of the Brisbane rate and less than half that of Sydney. The 12 month net absorption was -30,836m, but it should be remembered that the latter part of 2012 and 2013 to date have followed the highest CBD net absorption period on record. Sub-lease space, which spiked in the second half of 2012, has remained more or less stable at 2.5%, or more than a third of all vacant space. The stabilising of the level of sub-lease space may reflect a pause in the round of job shedding that occurred in the wake of the deferral of a number of capital-intensive resourcerelated projects in the second half of 2012. As already stated, there remains a substantial pipeline of committed and feasibility stage projects scheduled for WA over the near to medium term, and it is this investment pipeline that may reasonably underpin the States economic performance for some time yet. The current PCA figures also reflect a flight to quality, in that vacancy rates for Premium Grade buildings have in fact tightened appreciably to 2.7% (down from 4.5% in January) whereas A Grade vacancies have increased to 6.3%. The majority of the movement in vacancies has occurred in the secondary grades, and this has implications for the viability of this stock as new and refurbished supply comes on line from mid to late next year. Premium and A Grade net face rents are averaging approximately $835/m and $715/m respectively, with A Grade coming off about 3% from January this year. A Grade net face rents remain, by some margin, the most robust in the country.

$700 $600 $500 $400 $300 $200 $100 $0


Dec-11 Jun-14 Dec-10 Dec-08 Dec-09 Dec-12 Dec-07 Jun-08 Jun-09 Jun-07 Jun-10 Dec-14 Jun-11 Jun-13 Jun-12 Dec-13

CBD Premium Grade

CBD A Grade

CBD B Grade

Source: Colliers International

863 Hay Street, Perth Leased on behalf of Anglican Dioesesan

CBD Office | Research & Forecast Report | Second Half 2013

25

Investment market
Strong transactional activity in 2013
The first half of 2013 has seen a record level of sales activity, with more than $1.2 billion in transactions taking place. This figure exceeds the previous record of $1.1 billion set in 2011 and, importantly, it has been achieved over just six months unlike 2011, where the figure was the result of a full year of transactional activity. Major transactions to the end of June 2013 include the Dexus purchase of King Square towers 1, 2 and 3 for $434.8 million. These buildings are now under construction and expected to be delivered mid-2015 and included strong pre-commitment levels. Other major transactions include Mirvacs $231 million purchase of Allendale Square, the $458 million sale of 300 Murray St to Charter Hall and the $97.8 million purchase of the fourth King Square building (KS4) by not-for-profit insurer HBF, where the company will relocate its Perth head office to. Capital values have remained largely stable in 2013, due to relatively low vacancy and sound rental returns despite uncertain global and national economic environments Premium Grade asset capital values are estimated to be between $9,700/m and $10,850/m. A Grade values are estimated to have come off slightly, ranging between $8,200/m and $8,675/m, while B Grade assets are estimated to be between $5,500/m and $6,375/m. Capital yields for Premium Grade assets in the first half of 2013 have contracted very slightly, to between 7.5% and 8.25%. There has been a similar tightening of A Grade yields to a range of 7.75% to 8.5%, whereas B Grade yields have increased slightly to a range of 8.25% to 9.25%. Buyer interest and the weight of capital chasing Perth CBD office assets remains strong and is expected to continue in the near term. The differential between prevailing yields and the current cost of capital is believed to be a substantial driver of institutional activity in the Perth market, and while rents are expected to moderate somewhat over the short to medium term, the investor interest. continuing availability of capital is expected to stimulate continued
66 St Georges Terrace, Perth Sold on behalf of AMP Capital Investors.

PERTH A GRADE YIELD RANGE


10% 9% 8% 7% 6% 5% 4% 3%
Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13

IMAGE

In the first half of 2013 more than 92% of the value of CBD and near CBD office investments has been by institutions. The relative value share of activity by institutions has jumped by more than 75% since 2011. The level of inquiry and interest from both Australian and overseas investors is solid and reflects an appreciation of the strength of the fundamentals of the Perth market by investors, with overseas investors in particular, demonstrating increasing interest in Perth.

Source: Colliers International

26

A Colliers International publication

Metro Office CBD OFFICE

Supply, Vacancy & Demand


The first half of 2013 saw stock additions of just 9,144m with minimal withdrawals of 703m, resulting in a net supply for the period of 8,441m. A total of 70% of the new supply was derived from the completed refurbishment of 1 Mill St. Net increase in stock in the Perth market for the twelve months to end of June 2013 totaled 13,075m. Currently 166,587m of office space is under construction, with more than 86.5% (144,047m) comprising new build and the remainder refurbished space. Colliers International estimates just 3,100m (1006 Hay St) of space will be added to stock by the end of the year. In the short to medium term there is an estimated 195,975m either under construction or proposed in the Perth CBD, with approximately 79% of this space being new build including The Old Treasury redevelopment at 28 Barrack Street (30,219m), and the Kings Square Towers 1, 2 & 3 (52,781m) and the Brookfield Place Stage 2 building (34,000m). PERTH CBD OFFICE SUPPLY
70,000 2013 60,000
Total Office NLA (m)

100 St Georges Terrace, Perth Valued on behalf of ISPT as trustee of the Industry Superannuation Property Trust No 2

In addition to these, the proposed Kings Square 4 building, which has just been purchased by HBF, has an estimated delivery date of mid-2015. 999 Hay St (10,655m) is 61% pre-committed, and is expected to proceed to construction in the immediate future. Current refurbishment space under construction of 22,540m includes 565 Hay St and 32 St Georges Terrace.

2014

2015

Under Construction 166,587m 50,000 Proposed 29,388m


U/C

Mooted Mooted 283,895sqm 283,895sqm

40,000
U/C U/C U/C

30,000

U/C

0
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U/C

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Source: Colliers International

Committed New

Uncommitted Refurbishment

at

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Committed Refurbishment

How else can we help you? Speak to one of our property experts today. au.office@colliers.com

For further information about our research please contact: Michael Knight Manager | Research | Tel +61 8 9261 6675 michael.knight@colliers.com

98

Mo

-5

Mi

CBD Office | Research & Forecast Report | Second Half 2013

27

Research and Forecast report


Second Half 2013

Adelaide CBD OFFICE


Tenants make most of leasing conditions
Despite soft leasing demand for office space, pre-commitment and lease activity has continued across the Adelaide CBD office market. Tenant are making the most of soft leasing conditions to negotiate favorable terms. The current leasing environment has seen tenants make the most of conditions with those that have moved, doing so at attractive terms, as landlords continue to offer higher incentives. Peoples Choice Credit Union and Santos both recently pre-committed to a new development at 50 Flinders Street, which will ensure this project will proceed. At the same time Piper Alderman Solicitors, Medical Insurance Group Australia and Centrelink all signed new deals. The soft leasing environment comes on the back of rising vacancy rates which rose to 12.1%, as of July 2013. This growth in vacant space is the result of above average levels of backfill and new speculatively built space hitting the market, over the first half of 2013. The majority attributed to the completion of newly constructed 70 Franklin Street, the refurbishment of 100 Waymouth Street and backfill from the ATO move in late 2012. Outside the construction of 80 Grenfell Street and the associated backfill, the supply pipeline in constrained for 2014. This combined with the slow return of tenant demand over the course of the year is expected to see vacancy rates tighten over the medium term. Due to the large amounts of contiguous space coming to the market at a time when demand is soft, incentives have started to increase during the first half. With incentives ranging between 10-15% over the last five years it is only now that incentives have started to jump to 20%.Gross face rents at this stage appear to be reasonably stable, but the increase in incentives are having an impact on net effective rental growth. As vacancy is forecast to remain above 11% over the next 18 months, it is likely that rental growth across the market will be reasonably subdued. This is more the case for secondary stock as many tenants are likely to take to opportunity to move to better quality accommodation leaving backfill in secondary grade space. The investment market has seen demand for quality CBD office assets continue to grow with a diverse range of buyers are now in the market looking to secure assets. Small private investors are back, chasing higher yielding investments, outside of whats on offer at the banks. Large domestic and offshore institutions are also in the market looking to secure a high quality asset with long WALE, secure tenant in place. The key issue is the lack of assets being offered for sale which reflect this criteria. While it is yet to be seen, yield compression for Prime Grade assets is expected to be seen if a Premium Grade asset comes on the market for sale.

Colliers International Research Forecasts


Adelaide CBD Office
Indicator July 2013 July 2014 (f)

A Grade Gross Face Rents A Grade Net Effective Rents A Grade Incentives Total Market Vacancy Rate A Grade Yields A Grade Capital Values Total Supply Additions (m)
*Total market additions over 12 month period Source: PCA / Colliers International

$490 $296 20% 12.1% 8.25% $4,725 45,234

2.5% 2.9% 20% 12.3% 8.15% $5,020 20,000

28

A Colliers International publication

Metro Office CBD OFFICE

Leasing market
Employment growth forecast
Recent unemployment numbers for South Australia show a significant softening in employment growth with an unemployment rate of 7.1%. After job losses hit the finance sector over the course of 2012, forecasts remained optimistic for a return to positive white collar employment growth in 2013. However, recent white collar employment data from Deloitte Access Economics shows growth forecasts been revised down. Little to no rise in white collar employment is now expected through the second half of 2013. Finance sector losses and public service job cuts are still expected which will soften office demands from these sectors. While marginal growth across nine other sectors forecast that any decline in overall white collar employment growth will be offset. The outlook remains positive with white collar employment growth expected to rise marginally in December and continue to improve through each quarter of 2014.

When will growth occur


Overall rental growth will remain subdued in the second half of 2013 with forecast showing face rental growth of 1.4% over the period. Fitted out A/B Grade space remains in demand and with the release of further backfill and new space (100 Waymouth and 70 Franklin Street), tenants have an increased number of options. Incentives began to approach 20% this year and this trend will continue in the short term due to the availability of supply and rising vacancy. Secondary incentives are likely to be as high as 25%. There doesnt seem to be any danger of incentives getting much higher, with forecasts for 2014 holding incentives stable at these rates. ADELAIDE CBD NET EFFECTIVE RENTS
$350 $300 $250 $200 $150 $100 $50 $0
Jun-09 Jun-12 Jun-07 Jun-06 Jun-08 Jun-10 Jun-00 Jun-02 Jun-97 Jun-98 Jun-01 Jun-03 Jun-04 Jun-99

Lease activity remains subdued


The volume of lease transactions remains low with the market characterised by drawn out negotiation or decision making processes. There are a number of sectors that remain affected by the global and domestic financial markets and potentially, the federal election in September. As a result business sentiment is low and tenants are taking longer to review expansion and relocation plans.

Premium

A Grade

Jun-05

B Grade

Source: Colliers International

Pre-commitment leasing kick starts new development


Peoples Choice Credit Union and Santos have pre-committed to a new development at 50 Flinders Street. With Santos taking approximately 5,300m on top of the 10,000m already secured to Peoples Choice Credit Union site works are underway. Both tenants are secured on long term leases of between seven and 10 years at a rental rate which is representative of a high A Grade or Premium accommodation.

Tenants relocating and renewing


Statewide Super has relocated from 99 Gawler Place recently taking two floors plus part of the ground floor in 211 Victoria Square, approximately 2,015m, on a long term lease. Centrelink has renewed its tenancy in 55 Currie Street for another nine years. Origin Energy is currently shortlisting potential options for relocation in 2014, as are a number of State and Commonwealth Government departments. This should contribute to some movement from 2014 onwards.

100 Waymouth Street, Adelaide Leased on behalf of Cromwell Property Group

CBD Office | Research & Forecast Report | Second Half 2013

29

Jun-13

Jun-11

Investment market
$87 million sale
The most notable office asset sale so far this year is 45 Pirie Street, which sold recently for $87 million to CorVal, who were acting on behalf of Future Funds, Funds SA and VIC Funds Management Corp on a passing yield of 8.4%. The building was originally acquired by Commonwealth Property Office Fund (CPA) in 2002 and remains a prominent A-Grade office asset in the Adelaide market. The building has a Weighted Average Lease Expiry (WALE) of 4.7 years and more than 75% is leased by South Australia Government tenants. It is one of the few major assets in recent times that has been offered for sale via expression of interest campaign.

Buyers mixed and actively seeking prime assets


Buyers remain mixed and enquiry solid. Prime core located assets continue to be the most sought after and this trend is not likely to change in the short term. The calibre of major CBD assets sold recently is demonstrative of this demand. In total, there have been three major transactions (above $10 million) since the start of the year with an estimated total transactional value of $142.1 million. As mentioned in the previous report, the lack of onmarket opportunity remains a concern. This may restrain overall transactional activity in the short term.
100 King William Street, Adelaide Valued on behalf of Saphire Tempo Pty Ltd

Yields still holding


Prime yields have remained stable through the first half of the year and overall are likely to remain unchanged until late 2013, early 2014. At this stage expect to see some mild yield compression for Prime stock.

Secondary assts with value-add attract foreign investors


135 Pirie Street sold recently to a Chinese based investor for $7 million. The site was originally flagged as Aurora on Piries second tower but failed to secure enough pre-commitment for the development to go ahead. The buildings are likely to be refurbished as office space by the new owner. ADELAIDE CBD A GRADE AVERAGE YIELDS
10.0% 9.5% 9.0%
Average Yield Range (%)

8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0%


lJu 04 10 10 07 07 09 09 05 05 08 08 06 06 -11 -11 n-12 l-12 n-13 l-13 n- Jul- an- Jul- an- Jul- an- Jul- an- Jul- an- Jul- Jan Jul Ju Ju Ja Ja J J J Ja J J

45 Pirie Street, Adelaide Sold on behalf of Commonwealth Property Office Fund (CPA)

Source: Colliers International

30

A Colliers International publication

Metro Office CBD OFFICE

Supply, vacancy & demand


Supply trends drive vacancy higher
There are at least seven other existing buildings that have registered an increase in vacancy levels of 1,500m or more in the six months to July 2013. Some of this is a result of tenants consolidating space requirements and relocating premises. For example Statewide Super has recently relocated from 99 Gawler Place to 211 Victoria Square, freeing up more than 3,000m, and Adelaide University has vacated circa 4,100m in 233-236 North Terrace following their relocation to 44-60 Rundle Mall. Adelaide University has reduced their requirement by circa 700m in the move. This together with the speculative space still available in the newly completed 70 Franklin Street (15,363m), and the remaining backfill space that has returned in 100 Waymouth Street, (9,135m), has contributed to negative absorption in July 2013 and a further increase in the overall vacancy rate.

New development
Peoples Choice Credit Union have moved out of their existing premises on the corner of Flinders Street and Gawler Place to a temporary adjacent location with site preparations underway for their new building. Known as 50 Flinders Street, the 21,000m development finally got the go ahead after Santos pre-committed to lease 5,300m. Santos will be relocating from 30 Flinders Street upon completion. Peoples Choice Credit Union has preleased 10,000m and will be consolidating their headquarters, including Light Square and Flinders Street, into the new building. It is expected the new building will be completed in Q3-2015. The office component of Bendigo and Adelaide Banks new building, Rundle Place, at 80 Grenfell Street is almost complete. It is expected it will be ready for occupation in November. The bank will be consolidating their business from multiple CBD locations, the most significant being 169 Pirie Street. 169 Pirie Street sold late last year for $22.1 million however it is expected
Net Lettable Area (m)

2 King William Street, Adelaide Managed on behalf of 2 King William Street Pty Ltd

backfill has now been returned to the market and is available to lease. However, recent shifts within existing supply have added a further 19,000m to vacant supply levels. In the short term, overall vacancy is expected to remain above 12%. Although the overall vacancy rate is forecast to rise marginally in the short term, the majority of available space will be in Secondary grade stock. ADELAIDE CBD DEVELOPMENT PIPELINE
40,000 2013 35,000 30,000 2013 2014 2015 Mooted

that the building will be withdrawn for at least six months for refurbishment.

25,000 20,000 15,000 10,000 5,000 0


St 8 St St St St ll S t Tc e St St St St St Ma St St Pi rie Ci ty Ce nt ra nd er nd er ow nd le ou nd e ou Fli nd ow er lT rs er ie th th n ine eld kli fe er rr th kli n 7 ll

Vacancy on the back of rising supply


According to the latest PCA Office Market Report, the Adelaide CBD vacancy rate as of July 2013 was 12.1%, up from 9.5% in January 2013. An addition of 30,048m and negative net absorption of 11,956m for the six month period leading to this sharp rise in vacancy. Excluding 169 Pirie Street, all anticipated

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New or U/C Leased

New or U/C Vacant

Refurb/Backfill Leased

10 2

42

Refurb/Backfill Vacant

Source: Colliers International

How else can we help you? Speak to one of our property experts today. au.office@colliers.com

For further information about our research please contact: Kate Gray Associate Director | Research | Tel +61 8 8305 8806 kate.gray@colliers.com

51

CBD Office | Research & Forecast Report | Second Half 2013

31

Research and Forecast report


Second Half 2013

CANBERRA CBD OFFICE


Demand to slow over 2013/14 - Secondary grade markets feeling the pinch
The Canberra office market is facing some short term demand challenges, as demand stemming from the government sector is expected to be negatively impacted by the incoming government be they the incumbent party or the Coalition. Over previous cycles, any reduction in government employment in Canberra has been offset by an increase in the business services sector, as federal government employees are replaced by external contractors. This is not expected to be the case over the next few years, with the reduction in government demand expected to be greater than the corresponding increase in business services over this time. Having said that, austerity measures have already been introduced by the current government, and it remains to be seen how much deeper the cuts can go. Owners of secondary stock have actually benefitted from the greater scrutiny on public spending, as they have been more successful in retaining more budget conscious departments than in previous years. Indeed, the predominately local owners of this stock are showing the greatest confidence in the Canberra market, as they are familiar with these cycles and are more experienced at foreseeing these trends. Regardless of the short term impacts, we expect that demand will pick up again by late 2014, as government cutbacks are reigned in, and business services demand picks up again. By 2015, we also expect government demand to again be in positive territory, as the global economy picks up and the federal government eases the fiscal purse strings. The good news for landlords is that this supply cycle is coming to a close, and very limited new supply is confirmed for completion beyond 2013. Almost 38,000m of space has been completed in the first half of 2013, and a further 100,000m of space is due for completion over the remainder of the year, with 87% of this space pre-committed. A further 24,500m of speculative stock is currently under construction at 1 Canberra Avenue, Forrest that is due for completion in 2014/15. And while there is much talk of high vacancy rates in Canberra at the moment, on a precinct by precinct basis, the rate actually varies quite dramatically. The vacancy rate for A Grade stock in Barton and Civic remains reasonably low, at 6.47% currently. In fact, excluding the Airport precinct, A Grade vacancy for the Canberra is 6.7%, compared to 13.8% if we include the Airport. This emphasises what a major impact a precinct can have on the rest of market. For Prime Grade tenants looking for large, contiguous space in the CBD and the parliament precinct, options still are very limited, and will remain so for some time. It is for this reason that we still expect to see effective rental growth of around 5% for A Grade space over the next 12 months. This will be as a result of both an increase in face rents of 3% and relatively stable average incentive levels across the market. Secondary space, on the other hand, will continue to remain challenged. Owners of secondary space should be encouraged to take this opportunity while tenant demand is slow to renew and upgrade their premises, in order to attract tenants when demand picks up again in 2014/15. Landlords of secondary stock also need to use the lull in government expansion to their advantage. Looming lease expiries will provide existing landlords with an advantage as there is now greater likelihood of retention.

COLLIERS INTERNATIONAL RESEARCH FORECASTS


CANBERRA OFFICE
INDICATOR JULY 2013 JULY 2014 (F)

A Grade Net Face Rents A Grade Net Effective Rents A Grade Incentives Total Market Vacancy Rate A Grade Yields A Grade Capital Values (per m) New Supply Additions (m)*

$356 $318 10% 12.0% 7.50% $5,500 125,360*

0% -1.0% 11% 11.9% 7.25% $5,625 100,511

*Total market additions over 12 month period Source: PCA / Colliers International

32

A Colliers International publication

Metro Office CBD OFFICE

Leasing market
Tenant demand hurt by long lead in to federal election
While it is commonly assumed that the long lead in time to the Federal election has had a negative impact on tenant demand in Canberra, the local market is very experienced at dealing with changes in government, and can adapt accordingly. The lull in government activity and soft conditions in the leasing market has more to do with a greater than expected downturn in government revenue, than the federal government departments being in caretaker mode. On a positive note, the other major driver of white collar demand in Canberra, Business Services, is expanding as some federal government positions that are lost, are re-born as contractor positions and filled by those in the private sector. While employment is expected to continue to grow in this sector, over the two years to June 2015, it is not expected to grow by nearly enough to offset the contraction in employment in the government sector. This will result in negative white collar employment growth in the government and business services sector in the CBD and Barton, and this is the first time this has happened over the past 15 years.

rents and/or increase incentives. These deals, however, are not across the board and a closer analysis reveals that this sentiment should not apply to all markets. While the bureaucratic precinct of Barton/Forrest is experiencing an oversupply, placing pressure on rents and incentives, the CBD precinct is not experiencing the same issues. Overall, there is a disconnect between the demand for A Grade space and the supply of secondary grade space.

A Grade rents to continue to increase in CBD


Despite the softness on the demand side, A Grade rents in the CBD are forecast to rise, after a period of modest declines. The reason for this is the lack of quality space in CBD, resulting in limited options for those tenants seeking to relocate in the CBD, or upgrade to better quality space. This is particularly the case for contiguous A Grade space, where options are very limited, and rents and incentives will reflect this. B Grade rents, while only experiencing modest declines, are not likely to increase over the next two years. There is a strong underlying demand for quality, which generally means higher NABERS / Green star rated accommodation. Government austerity measures have shifted the weighting toward lean rather than green over recent years, however, this will shift back over time. CHANGE IN WHITE COLLAR EMPLOYMENT - GOVERNMENT & BUSINESS SERVICES - CANBERRA
7,000 6,000
Change in white collar employment

Incentives flat, but still modest compared to the rest of the country
The broader market dynamics continue to favour tenants, as the vacancy level remains elevated. Some landlords and developers with larger vacancy profiles which are most commonly secondary grade buildings - are under more pressure to secure positive cash flows, and have been more willing to decrease face

5,000 4,000 3,000 2,000 1,000 0 -1,000 -2,000 -3,000


20 05 -0 6 20 09 -10 20 10 -11 20 1112 20 12 -13 20 13 -14 20 14 -15 20 15 -16 20 16 -17 20 04 -0 5 20 03 -0 4 20 08 -0 9 20 06 -0 7 20 07 -0 8 20 17 -18

Government

Business Services

Source: Colliers International, Deloittes - Access Economics

14 Childers Street, Canberra Leased on behalf of Childers Nominees

CBD Office | Research & Forecast Report | Second Half 2013

33

Investment market
Very few transactions limited investmentgrade stock available
The have been only two investment sales transactions over $10 million in Canberra over the year to June 2013, with both these sales brokered by Colliers International. A private investor purchased 4 Mort Street in the CBD for $14.75 million in May of this year, which represented a yield of 11.72%. This is a fully occupied secondary grade building which was priced slightly out of reach for many local investors, while the lease profile was unsuitable for institutions, which meant a relatively thin market at the time of sale. More recently, Canberra House at 40 Marcus Clarke Street in the CBD sold to MPG Management Pty Ltd on an 8.38% yield which reflected a premium for surplus development rights. This is the largest transaction in the Canberra region since Growthpoints purchase of 10-12 Mort Street in June 2012.

underpinned by a safe AAA rated government tenant. Despite this appetite, there has been no foreign investment in Canberra over the year to date; however, this is the result of a lack of stock, rather than a lack of interest. When these types of properties do come on the market, there is generally strong competition amongst buyers. Colliers International is aware of two major assets currently being marketed (off market) to both national and international investors. Our understanding of the negotiation process for both assets indicates a firming of 25 to 50 basis points over the last 12 months, although this wont be confirmed until the sales are completed .

Yield spread of 600bp, higher than long term trends


Colliers International continually tracks the analysed yields, internal rates of return (IRR) and capital values of both valuations and sales over $5 million. The chart below shows the 12 month weighted average (by value) of yields and IRRs against the 10 year bond rate since the start of the century. The graph shows a current spread of about 600 basis points and is above the long term average spread of about 400 basis points. The trend over the last 12 months has been for the IRR to show compression while the 10 year bond rate has been steady. The lowest market yield spread of around 200 basis points was recorded when the market peaked in 2007. It should be noted that the above graph is the weighted average of all asset types for all asset categories, as the Canberra market is too thin to provide meaningful data analysis by individual categories. Our general view is that A Grade assets are achieving IRRs and yields that are up to 100 basis points firmer than the average and secondary assets are achieving yields and IRRs that are 100+ basis points softer than the average. The secondary market has experienced yield expansion since the GFC as Australian institutions have been more likely sellers than buyers and the asset type does not appeal to foreign institutions. We consider secondary yields have reached the bottom of the cycle and should remain steady throughout 2013. CANBERRA OFFICE MARKET YIELD PREMIUM
12.00% 10.00% 8.00% 200 bps 6.00% 4.00% 2.00% 0.00% 600 bps

Foreign investors have acquired over $1 billion of Canberra property since 2006
Canberras prime assets continue to appeal to foreign investors who are attracted to quality assets with long term leases

2007

2010

2001

2002

2004

2006

2005

2008

2000

IRR

Yields

10 yr Bonds

Canberra House, 40 Marcus Clarke Street Canberra Sold on behalf of Primespace Property Investment Limited. Managed on behalf of Morris Property Group

Source: Colliers International

34

A Colliers International publication

2009

2003

2012

2013

2011

Metro Office CBD OFFICE

Supply, vacancy & demand


Current supply cycle coming to an end
Only two new developments and one refurbishment that were under construction at the beginning of 2013 have reached practical completion, with the remainder due to complete imminently. The latter half of 2013 will see the completion of the ASIO building between Constitution Avenue and Parkes Way, which has so far run over a year over schedule. The major buildings that have completed include PWCs new headquarters in Sydney Avenue, Forrest, which has around 7,500m remaining for lease, and the refurbishment of 40 Cameron Avenue, Belconnen which was partly pre-committed by Hewlett Packard and has around 10,000m remaining.

A Grade and CBD vacancy is still very low. Higher vacancy in secondary grade space and bureaucratic precincts of Barton/Forrest
The CBD accounts for about 30% of the entire market and has grown from 460,000m in 2007 to over 650,000m today. The surge in growth from 2007 to 2011 caused the vacancy level to spike at 14% in 2010. However, strong demand from predominately government and business services firms, have gradually absorbed this space. Tenant preference for quality and the migration from old to new has caused a shift in the current vacancy profile with the combined B, C and D grades reaching 13.4% vacancy compared to only 3. 9% for A Grade. Overall vacancy for Canberra now sits at 12.0%, which is just over double the 10 year average rate of 5.6%. Looking forward, the vacancy rate is expected to remain at about these levels, while demand is subdued. Some precincts, however, are expected to fare better than others, with the CBD still expected to attract the majority of demand and continue to have minimal vacancy. Interestingly, sublease vacancy in the Canberra market is at its lowest level in years, with only 4,000m of sublease vacancy recorded in July 2013, compared with a high of 81,000m of sublease vacancy in July 2010. This indicates there is very
m

28 Sydney Avenue, Forrest PWC

No firm projects in the supply cycle, beyond projects currently under construction
Given that, on average over the past 10 years, Canberra has added just over 100,000m of office stock to supply per annum, supply levels moving forward are looking particularly low. Whilst there are a number of projects mooted, the only project committed to construction is 1 Canberra Avenue, Forrest. This is a 24,500m speculative project, and is due for completion in late 2014. There is a further 160,000m of supply that potentially be constructed over the next three or so years, but it is expected that only around half of these buildings will actually get off the ground. CANBERRA SUBLEASE VACANCY
90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0
Jan-04 Jul-04 Jan-05 Jan-06 Jul-06 Jul-05 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jan-10 Jul-10 Jul-13

little capacity for growth in occupied tenancies, which is further indication that demand could turn around quite quickly in 2014.

Source: Colliers International, PCA OMR

How else can we help you? Speak to one of our property experts today. au.office@colliers.com

For further information about our research please contact: Felice Spark Director | Research | Tel +61 2 9257 0373 felice.spark@colliers.com

CBD Office | Research & Forecast Report | Second Half 2013

35

Research and Forecast report


Second Half 2013

AUCKLAND CBD OFFICE


Tipping point
The balance between landlords and tenants is quickly reaching tipping point. The path ahead promises many opportunities for landlords who are increasingly more confident about their future prospects. This is to the detriment of tenants ability to secure decade-low rental rates. While this is primarily a feature of the prime sector, secondary sector landlords are poised to catch any overflow. Confidence in business and employment growth intentions is translating into increased demand for Auckland CBD office space. Net absorption of 38,000m was recorded over the first half of 2013, which pushed the overall office vacancy rate in the CBD down to 9.9%. This is the highest half yearly net absorption result since December 2002. The recently completed ASB Building on Jellicoe Street in Wynyard Quarter provided 18,000m of premium office space to the market. However, aside from the Fonterra building circa 2016 and the potential Downtown Shopping Centre development in 2019+, the CBD supply pipeline remains low by historical standards. For two and a half years the Auckland CBD office vacancy rate has been in decline and is forecast to remain historically low. The prime vacancy rate has decreased to 5.9% in June 2013 and almost halved in the last two years. Despite the 6,600m to be vacated at 205 Queen Street with ANZ banks departure, the prime vacancy rate will remain sub-7% for the rest of the year. The long-term average is 8.5%. The situation is even tighter in the premium sector with the vacancy rate, which now sits at 4.8%, forecast to decline to 2.7% or just 5000m in the next three months. The limited supply of available prime space is fuelling a rise in prime rents. In the 12 months leading up to June 2013, both prime face rents and net effective rents have increased. While face rents have increased marginally, incentive packages have reduced by an average of 3 percentage points compared to a year ago. We forecast rises at the top-end to return to moderate levels in the short-term with premium net rental growth of 2.5% between now and mid-2014, followed by a 5.3% rise the year after. The growth in rents will filter through to the investment market, which has already experienced a 20 bps firming in prime yields over the last six months. There is solid demand for quality stock, with the promising outlook for higher returns increasing the sectors attractiveness. Seismic strength of buildings remains an important consideration. The government have recently announced a 20 year time frame (5 years of investigation and 15 years to undertake works) for all commercial and multi-unit residential owners to increase the rating above 33%. However, over 30% of the respondents to our Tenant Earthquake Risk Assessment (TERA) survey signalled that above 66% of New Building Standard (NBS) was the most appropriate rating. Continuing market recovery, following the economic recovery path, is the theme for the year ahead, with both landlord and tenant strategies revolving around how to secure the best deal. This is reminiscent of the start of market growth periods in 1995 and 2003. While seismic strength requirements provide the new twist in this upswing, the focal point on quality remains absolute top priority for tenants and landlords.

COLLIERS INTERNATIONAL RESEARCH FORECASTS


AUCKLAND OFFICE
INDICATOR JULY 2013 JULY 2014 (F)

A Grade Gross Face Rents A Grade Net Effective Rents A Grade Incentives A Grade Yields A Grade Capital Values A Grade Vacancy Rate Total Market Vacancy Rate Supply Additions (m)*
*Total market additions over 12 month period Source: Colliers International

$424 254 16.3% 8.7% $3,483 7.50% 9.90% 18,000

$440 $264 14.4% 8.4% $3,846 8.70% 10.10% 0

36

A Colliers International publication

Metro Office CBD OFFICE

Leasing market
Confidence drives leasing
Confidence in business and employment growth intentions is translating into increased demand for Auckland CBD office. Net absorption of 38,000m was recorded over the first half of 2013, which pushed the overall office vacancy rate in the CBD down to 9.9%. This is the highest half yearly net absorption result since December 2002. Telecoms HQ on Victoria St, with one of the four pods now available for lease, sits outside of our CBD survey.

Seismic concerns remain


Seismic strength of buildings remains an important consideration in office leasing accommodation strategies. Over 30% of the respondents to our Tenant Earthquake Risk Assessment (TERA) survey signalled that above 66% of NBS was the most appropriate rating.

Aucklands outperformance
Overall, the Auckland CBD office leasing market continues to outperform other main centres, a reflection of the positive fundamentals of growth in business and employment. AUCKLAND CBD OFFICE VACANCY BY GRADE
4% 5% 13% 55%

Top end surges ahead


Auckland CBD leasing activity at the top-end is robust, with stay-puts, expansion and churn driving the market. Pressure at the top-end is not abating as we are aware of 5,050m of prime space that will be occupied by the end of October 2013. The stability in demand for the last year in the secondary sector has been the catalyst for small rental gains, up 1.5% from a year ago.

Rents will rise


The limited supply of available prime space is fuelling a rise in prime rents. In the 12 months leading up to June 2013, both prime face rents and net effective rents have increased. While face rents have increased marginally, incentive packages have reduced by an average of 3 percentage points compared to a year ago. We forecast premium net rental growth of 2.5% between now and mid-2014, followed by a 5.3% rise the year after.
* As at June 2013 Source: Colliers International Research
Premium A Grade B Grade C Grade

22%

D Grade

Vero Centre, 48 Shortland Street, Auckland Leased on behalf of Childers Nominees

CBD Office | Research & Forecast Report | Second Half 2013

37

Investment market
CBD office sales up
The pick-up in New Zealand CBD office sales by value in the second half of 2012 was the strongest since 2007 and the third highest recorded since our records began in 1998. This pushed the aggregate sales value of $2million plus properties to $654 million. Auckland CBD office sales contributed around $250 million. One of the most significant sales in 2013 includes Aucklands No.1 Queen Street, HSBC House for $103 million. Precinct Properties, New Zealands largest owner of CBD office buildings purchased the building from a long-term private investor. The latest acquisition now provides Precinct with almost two hectares of land positioned on Aucklands CBD waterfront. Private and unlisted local investors dominate New Zealand CBD office purchases over $5 million, typically accounting for almost two-thirds of all sales. Private investors accounted for more than half of all sales in 2012, with a similar pattern emerging in 2013. However, there is resurgence in listed sector office purchases, a reflection of the listed sectors average weighted premium to NTA.

Return to a negative yield gap?


Potential QE tapering and reducing Eurozone concerns have dragged global rates upwards. New Zealands short-term interest rate yields have also increased, with the RBNZs forecasts in June 2013 of the 90-Day interest rate increasing by 150 bps over the next three years, up from 130 bps predicted in March. Plotting the movements of Auckland CBD office yields against an indicative cost of borrowing (90 day bank bill rates with a 2.50% margin) shows a return to a negative yield gap may be approaching. The chart below shows that there was a positive yield gap only for brief periods before 2004, despite Aucklands comparatively high yields in context of advanced western economies. However, the forecast for rising interest rates together with the flat or firming yields (depending on the asset class and location), suggests another period of a negative yield gap may be approaching sooner rather than later. OFFICE YIELDS VERSUS INTEREST RATES
14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

ar

95 M

ar

96 M

ar

97 M

ar

98 M

ar

99 M

ar

00 M

ar

01 M

ar

1 02 r 03 r 04 r 05 r 06 r 07 r 08 r 10 r 1 r 12 r 13 r 14 r 15 a a a Ma Ma Ma Ma Ma Ma a Ma a M M M M M

Auckland CBD Office Prime Yield

90-Day Rate + 2.5% Margin

Source: RBNZ, NZIER & Colliers International

Deloitte Centre, 80 Queen Street, Auckland Managed on behalf of Sabrina Limited

38

A Colliers International publication

Metro Office CBD OFFICE

Supply, vacancy & demand


Vacancy down
The prime vacancy rate has decreased to 5.9% in June 2013 and almost halved in the last two years. Despite the 6,600m to be vacated at 205 Queen Street with ANZ banks departure, the prime vacancy rate will remain sub-7% for the rest of the year. The long-term average is 8.5%. The situation is even tighter in the premium sector with the vacancy rate, which now sits at 4.8%, forecast to decline to 2.7% or just 5000m in the next three months. The secondary sector also recorded a lift in activity in 2013, primarily from churn. The secondary vacancy rate has been at 11.9% in the past three surveys, however, reduced marginally to 11.8% in June 2013. Slow and steady will be the trend for the secondary sector with higher net absorption gains forecast over the rest of 2013. This will help stimulate secondary rental growth which has lagged the performance of other sectors.
SAP Tower, Level 28, 151 Queen Street, Auckland Project Management of base-build and fit-out

site has existing resource consent for a 71,000 sq m mixed-use office and retail development. In their latest annual presentation Precinct noted that office development may start as early as 2017, halfway through the development of the retail space. Aside from the Fonterra building and the Downtown Shopping Centre, the supply pipeline remains low by historical standards. For two and a half years the Auckland CBD office vacancy rate has been in decline and is forecast to remain historically low. While some businesses in prime office space may shift to city fringe or secondary accommodation, it is likely that many will want equivalent or better quality space within the CBD. Given the lead in for construction time, a new office building in the CBD may be committed to sooner rather than later to assist in alleviating the pressure at the top-end. AUCKLAND CBD OFFICE VACANCY BY PRECINCT

Supply increases
Auckland CBDs net lettable area has increased in 2013, a reflection of the recently completed ASB Building on Jellicoe Street in Wynyard Quarter, which we now include in our definition of the CBD. The 18,000m building accommodates around 1,400 staff members who have moved in over the last few months. The Wynyard Quarter currently comprises 41,000m of net lettable area comprising six buildings. It will increase in size further upon completion of the new Fonterra Head Quarters. Situated opposite Victoria Park on Fanshawe, Halsey and Gaunt Streets a 12-14 storey office building is earmarked for Fletcher Buildings site. Development is expected to start within the next six months. Fonterra will move from a number of premises, however, one of the largest is the Princes St headquarters where the lease expires in July 2016.

20%

16%

With Waterfront Auckland promoting development of various sites which could accommodate around another 50,000m of office accommodation, Wynyard Quarter has arrived on the stage as a viable office location.
4% 12%

8%

Development pipeline grows


0%

In the Core CBD, the announcement that the City Rail Loop (CRL) will be partially government funded coincides with the Precinct Properties plans to redevelop Downtown Shopping Centre. The

Core

Viaduct Precinct

Western Corridor

Midtown

Symonds Street

Anzac Avenue

Upper Queen

Britomart

Quay Park

Wynyard Quarter

Jun-12

Jun-13

Source: Colliers International

How else can we help you? Speak to one of our property experts today. au.office@colliers.com

For further information about our research please contact: Chris Dibble Manager | Research | Tel +64 9 359 7919 chris.dibble@colliers.com

CBD Office | Research & Forecast Report | Second Half 2013

39

Our experience
leased
5 Martin Place Sydney 13,850m2 On behalf of Colonial First State 699 Bourke Street Melbourne 15,000m2 On behalf of Mirvac Group

CBD OFFICE
863 Hay Street Perth 5,020m2 On behalf of Anglican Dioesesan

managed
17-19 Bridge Street Sydney 5,965m2 On behalf of Bridge Lane Holdings 399 Lonsdale Street Melbourne 10,176m2 On behalf of FKP Property Group 50 Cavill Avenue Brisbane 16,300m2 On behalf of Deloitte

sold
10 Barrack Street Sydney $62.5 million On behalf of Blackrock Investments Management 313 Spencer Street Melbourne $120 million (50% interest) On behalf of CBUS Property 66 St Georges Terrace Perth $82.37 million On behalf of AMP Capital Investors

valued
161 Castlereagh Street Sydney 60,000m2 On behalf of The GPT Group and ISPT 567 Collins Street Melbourne 54,271m2 On behalf of Investa Commercial Property Fund (ICPF and Investa Office Fund (IOF) 400 George Street Brisbane 43,500m2 On behalf of Grosvenor International and HSBC Trinkaus

project managed
71 Collins Street Melbourne 1,500m2 Design and project management Australian Bureau of Statistics 5,000m2 Project management Clifford Chance 1,200m2 Workplace design, project management and tenant representation

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AUSTRALIA AND NEW ZEALAND


IN THE LAST 18 MONTHS

752,000 square metres of CBD office space


Waterfront Place 1 Eagle Street, Brisbane 700m2 On behalf of Future Fund (Corval Partners) and Stockland 14 Childers Street Canberra 3,393m2 On behalf of Childers Nominees Tory Street Campus Wellington 14,500m2 On behalf of ANZ

213 CBD office assets, achieving a 97% occupancy rate


2 King William Street Adelaide 5,515m2 On behalf of 2 King William Street Pty Ltd Canberra House 40 Marcus Clarke Street Canberra 10,611m2 On behalf of Morris Property Group Deloitte Centre 80 Queen Street Auckland 23,940m2 On behalf of Sabina Limited

$2.74 billion of CBD office assets


45 Pirie Street Adelaide $87 million On behalf of Commonwealth Property Office Fund (CPA) Canberra House 40 Marcus Clarke Street Canberra $35.8 million On behalf of Primespace Property Investment Limited Bowen House cnr Lambton Quay and Bowen St, Wellington $61 million On behalf of a joint venture owned by AMP Capital Australia and New Zealand

6 million square metres totalling over $43.7 billion worth in value


100 St Georges Terrace Perth 31,394m2 On behalf of ISPT as trustee of the Industry Superannuation Property Trust No 2 100 King William Street Adelaide 19,588m2 On behalf of Saphire Tempo Pty Ltd Vero Centre 48 Shortland Street Auckland 39,438m2 On behalf of Kiwi Income Property Trust

Projects delivered by our award winning team


HarperCollins Publishers 2,100m2 Workplace design, project management and tenant representation Australian Securities Exchange 11,285m2 Design, project management and technology solutions SAP Tower Level 28 151 Queen Street Auckland 800m2 Project management of basebuild and fit-out

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Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. Colliers International 2013.

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