commercial property outlook

Commercial Property Where to from here?

Outlook

Andrew Ballantyne

Director – Research & Consulting

28 September 2011

Commercial Property Overview

1. Office Market

2. Retail Market

3. Industrial Market

Office Market Overview

Office

0%

5%

10%

15%

20%

25%

30%

35%

Sydney Melbourne Brisbane Perth Adelaide Canberra

Vaca

ncy

Rate

70s Peak 80s Peak 90s Peak 00s Peak Q2 2011

Source: Jones Lang LaSalle Research

Back to the fundamentals National CBD Office Markets Vacancy Rates

Prime Gross Effective Rent Outlook

Office Sector

As at Q2/2011

(AUD /sqm p.a. )

Q/Q (%) Y/Y (%) 2010 to

2013

CAGR

2013 to 2016

CAGR

Sydney CBD 572 1.3 5.2 9.2 3.3

Melbourne CBD 413 1.0 4.1 6.5 1.5

Brisbane CBD 457 0.0 -3.6 3.3 7.7

Adelaide CBD 358 2.2 9.4 3.5 2.1

Perth CBD 691 3.9 10.9 6.4 2.2

Canberra 338 -0.2 -0.8 -1.9 5.8


Office rents were growing solidly in most markets

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Sqm

0%

3%

6%

9%

12%

15%

Vac

ancy

Rat

e

Completions Under Construction Assumption Vacancy Rate


Is there a risk to the 2014-15 assumptions? Melbourne CBD Completions, 2004 to 2015

Under Construction = 252,000 sqm

Retail Market Overview

0%

2%

4%

6%

8%

10%

Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11

Sto

res

Vac

ant

CBD Regional Sub-Regional Neighbourhood

Vacancy rates remain below the long-term average National Retail Vacancy Rates, 2002 to 2011


4.1%2.0%CBD

4.8%

3.3%

1.4%

National Average

Neighbourhood

Sub-Regional

Regional

6.0%

1.5%

0.9%

Melbourne

4.1%2.0%CBD

4.8%

3.3%

1.4%

National Average

Neighbourhood

Sub-Regional

Regional

6.0%

1.5%

0.9%

Melbourne

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sqm

Regional Sub-Regional Neighbourhood CBD Bulky Goods

Note: Only includes projects under construction


Supply is concentrated in the bulky goods sector Melbourne Retail Completions, 2004 to 2013

Market Overview

Industrial

0

200

400

600

800

1000

2004 2005 2006 2007 2008 2009 2010 2011 2012

'000

Sqm

North West South East Fringe Gross Take-Up

Speculative development has achieved leasing success Melbourne Industrial Market Completions & Take-Up, 2004 to 2012

Note: Only includes projects under construction


Prime Net Rent Outlook

Industrial Sector

Current

(AUD /sqm p.a. )

Q/Q (%) Y/Y (%) 2010 to

2013

CAGR

Sydney (S) 146 0.0 4.7 2.9

Sydney (OCW) 106 1.7 4.2 3.2

Melbourne (S.E) 80 0.1 5.5 3.0

Melbourne (W) 69 0.0 1.5 2.3

Brisbane (S) 112 0.0 2.1 2.7

Perth (E) 138 1.9 10.9 5.5

Adelaide (NW) 85 1.9 0.0 2.0


Rents have generally returned to growth

Conclusions

• Market fundamentals should be creating more development interest

- Escalation in financial market volatility and sovereign debt issues will delay tenant decision-

making

• Finance constraints means development will be demand-led

• A development cycle delayed not cancelled

- Low levels of spare capacity across most Australian office markets.

- Industrial development will remain tenant-led

- Retail supply is very focused on specific retailers & growth corridors

This document is confidential to the recipient of the document. No reference to the document or

any part thereof may be published, stated or circulated in any communication with third parties

without prior written approval from Jones Lang LaSalle. This document has been produced solely

as a general guide and does not constitute advice. Whilst the document has been prepared in

good faith and with due care, no representation is made for the accuracy of the whole or any part of

the document. Jones Lang LaSalle accepts no liability for damages suffered by any party resulting

from their use of this document.

Disclaimer

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