Infrastructure projects to support the ACT’s thriving higher education sector are set to stimulate further growth in what is already the nation’s strongest economy according to CBRE’s latest Market Outlook report.
The Australian Bureau of Statistics (ABS) recorded increased economic activity of 2.4% in the ACT through 2019’s first three quarters, including 1.1% in the September quarter alone.
They were the highest figures across Australia’s major markets, with similar levels of growth forecast through 2020.
> View the full CBRE Australia Real Estate Market Outlook 2020
> View the full Canberra City Outlook 2020
CBRE Research Manager Joyce Tiong said rapid expansion has been underpinned by higher education, tourism and professional services, with education the largest single contributor at $1.04 billion in 2018-19.
“Strong fundamentals continue to drive the ACT economy to growth well above long-term averages, and the figures in Australia’s other major cities,” Ms Tiong said
“Education exports in the ACT have grown by 115% over the past five years, highlighting Canberra’s standing as a popular destination for international students. These students across five university campuses are contributing to Canberra’s population growth, which is lifting demand for improved infrastructure and services including housing.”
A total of $3 billion of infrastructure investment through to 2022-23 includes upgraded transport links led by Stage 2 of the Canberra Light Rail to Woden, translating into steady job growth over the near-to-medium term.
CBRE’s annual Market Outlook report also forecasts growth in the residential property sector.
While average house prices in Canberra fell by 4% across 2019, they are forecast to grow by up to 5% this year, with unit prices to rise by up to 2%.
“Improved consumer confidence is expected over the long-run,” Ms Tiong added.
“First-home buyers are boosting demand in lower-price brackets, aided by the reintroduction of stamp-duty concessions, with pent up demand now flowing through. However, the unit completions cycle is still yet to reach its peak, which could see a further uptick in vacancy in the near term.”
Turning to the office sector, the report highlights that Canberra office assets totalling $664 million changed hands in 2019, well clear of the 2018 figure of $236 million.
This coincided with a continued decline in prime office vacancy rates, which currently sit at around 7% after peaking at 16% in 2014.
Those figures are set to increase, though, with 205,000sqm of new supply in the pipeline between 2020-2023.
CBRE ACT Managing Director Zoe Ferrari said the entry of premium quality assets had helped Canberra record Australia’s largest increase in net face rent of 2019, while five-year income and capital returns forecasts, and prime yields, were second only to Adelaide.
“Flight-to-quality and co-location are currently the key demands, along with Commonwealth Government departments facing a push to become more efficient in how they occupy their space,” Ms Ferrari said.
“We are seeing an increase in demand from the private sector albeit focused on superior quality assets offering efficient floor plates, increased density opportunities and improved building amenity.”
Ms Ferrari added; “New supply of premium quality office space will result in a re-rating of top-end assets, underpinning rental growth.”
Capital Markets ACT Director Nic Purdue believes there is a compelling investment story, noting interest in the market has never been more buoyant.
“The underlying economic fundamentals in the ACT – a built environment of high-quality assets with AAA-rated tenants, and a strong value proposition relative to other Australian capital cities – has helped push Canberra higher on the radar of most major investors,” he said.
“After a strong year for transaction volumes the market could be in for another period of solid trade.
“The enormous weight of capital chasing investment opportunities in Canberra, together with limited stock available in other markets, has created a perfect storm for ACT landlords to capitalise on the pent-up demand and recycle capital.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
