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Office vacancies falling

In line with other capital cities, vacancies continue to fall in the Perth CBD, according to a report by real estate group Knight Frank.

The company’s property review says all office markets have slowed over the last six to nine months, in line with patchy business sentiment and, in some markets, the completion of new or refurbished space.

Generally, most CBD markets remain at the mid-upturn phase of their current cycle, except the Sydney CBD where that market is approaching its peak.

Knight Frank economist Michael Kingcott said while sentiment is improving, the slow demand for office space and leasing activity reflect uncertainty in the future performance of the economy.

“This and further rationalisation of space, particularly within the insurance, banking and government sectors, are the cause of relatively low levels of net absorption in most markets in 1998,” he said.

The Brisbane CBD is starting a new building cycle, whereas in Melbourne, Adelaide and Perth CBDs refurbishment of existing buildings remains heavily focused.

The patchy demand and completions have contributed to an increase in vacancies in Sydney, Melbourne and Brisbane CBDs over the past six months.

“Nonetheless, vacancies continue to fall in Perth, Adelaide and Canberra,” Mr Kingcott said.

“Melbourne, Brisbane and Perth CBDs continue to experience some rental growth, particularly for better quality space.

“lnvestment demand for high yield or blue chip properties remains buoyant, supported by property funds from syndicates and superannuation funds.

“This continues to place downward pressure on yields. The short-term outlook is generally one of cautious improvement.

“The recent improvement in business conditions may prompt an increase in leasing activity over the next six to twelve months, contributing to lower vacancies and supporting some rental growth, particularly in the Melbourne, Brisbane and Perth CBDs.”

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