Office sector subdued as rents flatten
Office landlords are not expecting any rise in rents for at least 12 months as market conditions soften and tenants demand higher incentives to make leases more attractive, company chief executives say.
Speaking on a panel at the Property Council of Australia's property congress, the heads of GPT, Grocon, Macquarie, Brookfield Multiplex and DEXUS Property, who control more than $50 billion of the country's office assets, painted a flat short-term outlook.
They all said more stability was expected in the property and share markets after the federal election on September 7, which panellists tipped would bring in a Coalition government.
GPT chief executive Michael Cameron said while gross rents were rising there were "significant headwinds" for the office sector, telling the congress: "There seems to be a disconnect between reality and what is happening in the market for demand, so I think there will be moderate, if any, rises in office rents in the short term."
Mr Cameron said he expected solid growth in the logistics and industrial businesses until the office and retail markets improved in the medium term.
Grocon deputy chief executive Carolyn Viney said she saw no "real rent growth" in the short term, but quality and new properties would always be in demand in any market conditions.
Ms Viney said one new site is by Grocon and the private Markham Corporation, which has lodged a development application with NSW Planning and Infrastructure for the redevelopment of the Sydney IMAX Retail and Entertainment Complex at Darling Harbour. The DA is for The Ribbon, an office, retail and entertainment complex with a prominent north-facing Darling Harbour frontage.
Another office project is the planned redevelopment of the City Tattersalls Club, at 194-204 Pitt Street, where members voted this week on plans to redesign the site into a 48-storey building to include upgraded member facilities, commercial services, hotel rooms and residential apartments.
The club bought the adjacent site at 194 Pitt Street from the Merivale Group in 2007 for about $9 million. At the time City Tattersalls chairman John Healy said the purchase of the property, which has six floors and space totalling 762 square metres, would give the club extra space and a more visible entrance on Pitt Street.
The club has lodged a pre-development application with City of Sydney, saying it has made recommendations to the club's plans, including a preference for commercial, retail and hotel uses at the location.
The council said the applicant should take into account Hyde Park solar access planes to ensure no sunlight is lost and that heritage facades and interiors must be protected.