The Office Perspective | 27 November 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:

• JLL’s Global Real?Estate Perspective
• Articles of Interest

JLL’s Global Real?Estate Perspective

Despite evolving risks, JLL's November 2024 Global Real Estate Perspective paints a broadly positive economic outlook.

As inflation continues to fall, central banks are cutting interest rates, which is reducing economic headwinds. This, combined with robust labour markets is leading to similar or rising GDP growth forecasts for many economies in 2025.

The real estate capital markets are showing signs of stabilisation and growth. Investor sentiment has improved compared to the end of 2023, with global dry powder remaining high at US$373 billion. This is expected to support continued growth through 2025.

In the debt markets, origination volumes are trending upwards, and lower index rates are improving the cost of debt globally. Lender confidence is strongest for in-favour sectors such as living and logistics assets. The U.S. has seen a notable rebound in CMBS issuance, increasing by 160% over the year to date.

Investment activity gained momentum in the third quarter of 2024. Global direct investment volumes reached US$182 billion, up 26% year-over-year. Year-to-date investment totalled US$471 billion, reflecting a 6% increase. Investors are focusing on growth-oriented sectors such as living, logistics, and alternative property types.

Global Office Sector Analysis:

• Global office leasing activity in Q3 was level with the previous quarter but 12% higher year-over-year.
• U.S. office leasing showed strong growth, up 25% year-over-year.
• Asia Pacific and Europe office leasing volumes remained largely unchanged.
• Year-to-date global leasing is 11% higher than 2023 and on track for the highest annual total since 2019.
• Global office vacancy rate increased slightly to 16.7% in Q3.
• New office completions in 2024 are projected to increase slightly from last year to 16.7 million square meters.
• 2025 is expected to see a 20% decrease in new office completions.
• New office groundbreakings in the U.S. have fallen to their lowest level on record.
• Europe's office supply is expected to slow in the coming year.
• Asia Pacific will maintain above-average new office deliveries.
• Overall office vacancy is expected to peak and start declining over the next 12 months.
• Availability for in-demand office space and locations is falling in many markets.
• Leasing activity is improving, with tenants focusing on upgrading their portfolios.

Articles of Interest – National Office Market

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Article #1 – The Australian – Grant Hyatt Melbourne check in for retail revamp

Key points:

• Grand Hotel Group plans a major mixed-use redevelopment of its Grand Hyatt Hotel in Melbourne.
• The project focuses on transforming the hotel's podium from levels four to the rooftop.
• A new luxury retail and food and beverage precinct will be introduced.
• The facade will be completely redesigned to enhance the streetscape along Collins Street.
• The redevelopment aims to increase activation and foot traffic in the area.
• The project will retain much of the existing podium structure, allowing business operations to continue during construction.
• Upon completion, the site will encompass approximately 84,500 square meters.
• The renovation emphasizes sustainability by reimagining the existing structure rather than rebuilding.
• The redesign aims to enhance the public realm and create a more connected, vibrant Melbourne.
• Separately, it's mentioned that the Park Hyatt Hotel in Melbourne may soon be put on the market for over $200 million.

Article #2– The Age – Labor’s foreign student cap shot down

Key points:

• Labor's proposed laws to cap foreign student numbers have been defeated by the Coalition and Greens.
• The opposition will block the legislation despite earlier support for student caps.
• The government aimed to limit international students to 270,000 next year as part of efforts to reduce immigration.
• Coalition plans to reveal their own mechanism to reduce student numbers before the election.
• The Greens oppose the bill, calling it racist and scapegoating international students for the housing crisis.
• Group of Eight universities welcomed the Coalition's position, citing need for constructive conversations.
• Universities Australia expressed concern about ongoing "war" on the international education sector.
• Education Minister Jason Clare criticized the opposition's stance as inconsistent with their previous statements.
• Universities have warned of administrative chaos and financial impact from the proposed legislation.
• The existing Ministerial Direction 107, which slows visa processing for certain countries, remains in place.
• Uncertainty persists in the sector regarding policy direction until the start of the academic year.

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