The Office Perspective | 17 September 2024

The JLL Victorian Office Investments team's latest edition of The Office Perspective is now out!

Please contact me on 0415 767 915 / [email protected] or any member of the JLL team if you would like to receive our more detailed weekly updates via email each Monday morning.

This update will cover:

• The Real Melbourne Narrative
• JLL’s Metro Office Event
• Articles of Interet

The Real Melbourne Narrative – Behind the Headlines – Understanding the Nuances, the Opportunities & Challenges

This week, JLL will be formally releasing our new White Paper – The Real Melbourne Narrative – which is a comprehensive report that identifies, analyses and explains the nuances of the Victorian property market.

Prior to the release of the report, JLL’s Head of Strategic Research, Annabel McFarlane, has prefaced the official publication by saying:

“The outlook for Melbourne is increasingly positive, and as the capital value trough approaches, investors are looking to market growth fundamentals.

However, a nuanced approach and strategic thinking is required. Different real estate sectors are being influenced by different supply and demand dynamics. Melbourne’s office and hotel markets completed significant supply cycles in recent years.?

Demand is selective and focused on the best spaces in the best places. We are already seeing pricing tension for the best assets and the best locations, and this will support greater income growth and transaction liquidity in coming years”.

If you would like to receive a copy of this new research report, please contact any member of the JLL team.

Samples from our new White Paper:

Summary from JLL’s Metro Office Event

We thoroughly enjoyed hosting our clients last week in our new offices to discuss key themes and trends within Melbourne’s Metropolitan office markets.

Despite current headwinds, the JLL team is confident that the worst has likely passed, with an optimistic outlook on the Victorian market’s trajectory.

“Tenants want it all” - we addressed the evolving demands of tenants, acknowledging that while they may desire everything, it's not feasible to provide it all. However, we highlighted three fundamental actions landlords can focus on to respond to these growing needs:

• Investing in fitted space
• Strategic evolution and activation of common areas
• Realising the importance and impact of creating an ‘inspection experience’?

From a capital markets perspective, we're observing strong investment activity, particularly from local Victorian buyers, with an increase in interest from interstate investors, primarily from Sydney. We’ve observed this trend as a byproduct of our market beginning to appear comparatively affordable relative to other states.

Articles of Interest – National Office Market

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The Australian Financial Review – Office market divided between duds and gems

Key points:

• The value of prime office property, along with industrial and retail assets, is expected to rebound as borrowing costs ease.
• Office values have dropped 22% since the previous peak, larger than the 19% fall during the global financial crisis.
• Interest in properties in the CBD is increasing, which may leave more suburban offices stranded.
• Tenant demand for modern, well-located assets is increasing, while older assets are becoming more difficult to attract and keep tenants.
• Premium office towers in prime locations are still sought after by institutional investors.
• Lower-grade offices may struggle to sell at a price that makes conversion for other uses viable.
• Some buildings may offer relative bargains due to being devalued too much.
• Despite the challenges, some executives have a positive sentiment and anticipate asset price pick-up as interest rates ease and workers return to offices.
• The office market is expected to be split between premium assets in CBDs and lower-quality buildings in less attractive locations or requiring costly updates.

We hope you have enjoyed this edition of The Office Perspective. Please reach out to our specialised team if there is anything we can assist you with.

Tim Carr - JLL Victorian Office Investments

Capital Markets at JLL