Rental growth should stay steady
OFFICE markets are tipped to incur steady rental growth and a marginal decline in incentives in the coming months, provided there are no slumps in white collar employment.
OFFICE markets are tipped to incur steady rental growth and a marginal decline in incentives in the coming months, provided there are no slumps in white collar employment.Charles Moore, the fund manager for the Commonwealth Property Office Fund, made the predictions after the fund posted a 73 per cent rise in net profit for the year ending June 30.He said he was "cautiously optimistic" about the outlook for the office market and forecast a distribution guidance of 5.65? per unit for the 12 months ending June 30, 2012.Darren Steinberg, the managing director of property for Colonial First State Global Asset Management, which manages CPA, said the group was confident about the position of the underlying national office markets."Financial services groups, such as the expansion of the Deloitte offices at 225 George Street, will continue to look for new space in the capital cities," Mr Steinberg said.In the coming year, the fund is looking at a potential one-off payment of an estimated special distribution of about 0.6? per unit. CPA's profit gains came from property revaluations and a net gain, from a loss a year ago, on the revaluation of derivative products.Excluding the one-off, the net distributable income was $155.3 million, compared to $136.2 million for the previous year. That was in line with market expectations. However, property analysts said the lower forecast distribution was due in part to timing differences associated with the settlement of asset sales after the year end.In the past month CPA has sold a 50 per cent share of its 5 Martin Place office tower in Sydney, known as the "Money Box", to Cbus Property for about $42 million and its 259 George Street site to Metrocorp for $395 million.In Melbourne, CPA has a call option to acquire a 50 per cent interest in 8 Exhibition Street, from Cbus Property, as well as a strategic alliance with Grocon that may be conducive to asset acquisitions.The proceeds will be used to buy new assets, retire debt and boost the development pipelines. A share buy back is being reviewed."Our focus for the year ahead will remain on reducing ... vacancies and [coming] expiries within the portfolio, and securing tenant pre-commitments for key developments as we take advantage of the expected stronger office market fundamentals," Mr Moore said.