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Average office rents in Brisbane and Perth soared in the past year thanks to a mining boom, taking Australia's third and fourth-largest cities past Sydney as the country's priciest markets.
Office rents in the Queensland state capital, Brisbane, rose 68 per cent in the year ended June 30 to average A$696 a square metre, Jones Lang LaSalle said in a report. Offices in Sydney, Australia's largest city, fetch an average A$588 a square metre, the report said. Rents in Perth, Western Australia's capital, rose 45 per cent.
Vacancies dropped in Brisbane, Perth, Melbourne and Sydney as economic growth accelerated, said Jones Lang LaSalle, the second-biggest publicly traded commercial real estate broker. Growth is being fuelled by China's demand for commodities, much of them produced in West Australia and Queensland. BHP Billiton, the world's biggest mining company, agreed this week to lease about 60 per cent of a Perth tower being built by Multiplex Group.
"Developers are responding to these conditions and the supply pipeline is swelling in Brisbane and Perth," Leigh Warner, an analyst at Jones Lang, said in the report. "The long construction lag in office markets means tenants forced to commit to existing space now are paying a premium."
Sydney, where vacancy rates dropped to 7.6 per cent from 10.6 per cent a year earlier, remains the only Australian city where some office rents exceed A$1000 a square metre.
Tokyo has Asia's most expensive offices, averaging $1346 a square metre in the first quarter of this year, according to Jones Lang LaSalle.
Rents are set to climb in Sydney, where about 102,000sq m of space is under construction, less than the 112,000sq m a year of net space leased in the past three years.
"With moderate new supply over the next few years and with tenant demand expected to remain high, the Sydney CBD vacancy rate will fall further over the next few years," Warner said. "Consequently, we believe the market has strong rental growth prospects."
Perth vacancies fell to 0.6 per cent, from 2.6 per cent, and Brisbane vacancies plunged to 0.3 per cent from 2.5 per cent.
BHP Billiton is among Australian companies posting record profits as demand from China fuels price gains for raw materials.
The Melbourne-based company increased output of aluminium, iron ore and nickel to all-time highs in the year to June 30. It gets much of its ores for those metals from West Australia.
Jones Lang estimates there is about 201,800sq m of space being built in Brisbane's central business district, with a further 133,800sq m under construction outside the CBD.
Perth developers are building about 122,600sq m of office space.
Melbourne vacancies declined to 5.8 per cent, the lowest since the early 1980s, with rents about 35 to 50 per cent cheaper than in Sydney, Brisbane and Perth. Developers are building some 366,000sq m of space in Melbourne, out of almost 1.5 million sq m under construction nationally in markets monitored by Jones Lang LaSalle.
- Bloomberg
