Potential in Melbourne office market

The size and diversity of the Melbourne office market makes it a favourable investment destination. This view is supported by recent property market reports from a number of respected real estate organisations.

Colliers International’s Metro Office Research & Forecast Report (Second Half 2014) called Australia’s metro office markets the “engine room of employment” in all capital cities with in excess of 80 per cent of people in professional occupations employed outside the CBDs.

The report also noted that population growth is expected to be significant over the next few decades with Melbourne planning for 1.6 million new dwellings by 2051. Melbourne and Sydney have the most significant population growth forecast. This growth is noted as causing increased competition between residential and commercial projects for development sites. Colliers International note a number of examples in recent years of residential developers purchasing secondary commercial sites with plans to redevelop for residential use.

Jones Lang LaSalle’s Pulse Research Report released in June this year stated the Melbourne suburban market accounts for 12%, or $4.25 billion, of market value across all non-CBD office markets in Australia. Their review of the market noted Victoria’s solid economic growth over the last five years since the Global Financial Crisis.

Strong population growth and a higher level of housing construction in the state saw Victoria’s economy grow at a pace slightly below the national average. Deloitte Access Economics forecast the state economy would grow by around 2.2% in 2014. The forecast for 2015 is slightly higher at around 2.8%. The outlook for the longer term in Victoria remains very strong with Gross State Product growth of 2.7% per annum forecast over the coming decade.

The Jones Lang LaSalle report also notes that generally the economic environment appears to be improving with global growth slowly gaining momentum after a period of two years of below-trend growth. In Quarter 4, 2013, Australian Gross Domestic Product (GDP) grew by 0.8% bringing it up to 2.8%. This indicates growth may be balancing out. In response to the reduction of mining investment, the strategy to drive growth has shifted to bolstering domestic demand areas that are interest rate sensitive.  It would appear that lower interest rates are having an impact at last with household consumption strengthening.

Trilogy Funds agrees the Melbourne office market has a lot to offer and its next property trust will own a modern, three level office building in Melbourne’s north-west. The anchor tenant, with 70% of the NLA, is leased until 2023. Find out more about the Ravenhall Office Trust here.