Canberra cbd office research forecast report second half 2012

CANBERRA OFFICERESEARCH & FORECAST REPORT

www.colliers.com.au/research

Vacancy Declines but Future Supply Increases LoomThe Canberra region office market continued to see positive net absorption, and decreasing vacancy levels over the six months to July 2012, changing the dynamic from a tenant-driven market to a more balanced equilibrium between tenant and landlord. The vacancy rate has now reached its lowest level since January 2010, following 12 months of positive net absorption and limited new development.

Although there has been very little new development over the past 18 months, a new supply cycle is currently in play with 14 buildings to be completed or refurbished over the next 18 months. Eight of these buildings are scheduled for completion in the next six months totalling 140,704m². In 2013, six more buildings will complete, adding a further 62,221m² of space. Although the majority of space is pre-committed a large amount of back fill will enter the market, pushing up the vacancy rate.

With limited new supply available over the last 12 months the Canberra region has seen strong rental growth in both A Grade and secondary assets as tenants compete for space. Both A and B Grade net effective rents saw growth over the 12 months to July 2012, with 4.1% and 3.6% respectively. This is the strongest growth seen since 2008 for A Grade assets and 2007 for B Grade assets.

Investment sales activity over the first half of 2012 has been strong, with four major transactions completed. Total sales volumes have already surpassed the total sales of the past two years with $377.8 million having been transacted. Offshore investors have been particularly attracted to the Canberra market, dominating total sales volumes for the first half of the year. Steady investor interest has meant that yields for A Grade assets have remained unchanged over the last two years, while B Grade assets have reached the bottom of the market cycle in over the first half of 2012.

CANBERRA REGION OFFICE MARKET INDICATORS

Grade PrecinctAverage Net Face Rents ($/m2 pa)

Average Incentives

Average Outgoings($/m2 pa)

Average Capital Values

($/m2 pa)

Average Market Yield*

LOW HIGH LOW HIGH LOW HIGH LOW HIGH

A Grade

CBD $375 $425 8% 10% $82 $5,000 $6,000 7.00% 8.00%

Barton $350 $400 10% 13% $75 $5,000 $5,750 7.30% 8.00%

Woden $300 $350 10% 15% $65 $4,000 $4,500 7.80% 8.50%

Other $275 $325 10% 20% $60 $3,500 $4,000 7.00% 8.80%

B Grade

CBD $325 $375 10% 13% $87 $3,500 $3,750 9.00% 10.00%

Barton $275 $325 10% 15% $75 $3,250 $3,750 9.00% 10.00%

Woden $250 $300 10% 20% $65 $3,000 $3,250 9.50% 11.00%

Other $225 $275 10% 20% $60 $2,750 $3,250 10.00% 11.50%

*Equivalent Reversionary Yield Data correct as at Q2 2012 Source: Colliers International Research

MARKET FORECAST INDICATORS–6 MONTHS

KEY HIGHLIGHTS

OVERALL PERFORMANCE

NEW SUPPLY

TENANT DEMAND

VACANCY

INCENTIVES

FACE RENTS

EFFECTIVE RENTS

CAPITAL VALUES YIELDS

50 Marcus Clarke Street, CivicThe sale of 50 Marcus Clarke Street marked the largest sale in the Canberra region in the past five years. The property was sold to CIMB Trust Capital for $225 million.

• Investment sales volume has reached $377.8 million over the first six months of 2012; more than double 2011 calendar year figures.

• Vacancy levels have declined to 9.8% in the Canberra region, this is the lowest level recorded since January 2010.

• A Grade net effective rents have recorded 4.3% growth in the 12 months to July 2012, B Grade net effective rents recorded growth of 3.6% over the same time period.

SECOND HALF 2012 | OFFICE

Economic UpdateSTRONG Q1 2012 GDP RESULTThe March quarter 2012 Australian Bureau of Statistics (ABS) Gross Domestic Product (GDP) data showed robust growth for the Australian economy during the quarter. In seasonally adjusted terms, GDP increased 1.3% during Q1 2012, up from 0.6% in Q4 2011, taking through-the-year GDP growth to a strong 4.3%, the largest annual result since September 2007. The main contributors to expenditure on GDP, during the quarter, were household final consumption (0.9 percentage points) and Private gross fixed capital formation (0.8 percentage points) while Net exports detracted 0.5 percentage points. The main industry contributors to GDP were Mining (up 2.3%), Financial and insurance services (up 1.7%) and Professional, scientific and technical services (up 2.8%).

EMPLOYMENT REMAINS TIGHTThe July 2012 monthly ABS Labour Force data shows that the Australia employment market continues to remain tight. The latest results showed that the unemployment rate declined by 0.1 percentage point from, a revised, 5.3% in June to 5.2% in July 2012. This saw total employment increase by 14,000 persons with both full-time employment increasing by 9,200 persons and part-time employment growing by 4,800 persons, during the month.

INFLATION RATE REMAINS LOWThe latest inflation data from the ABS shows that annual headline inflation rose just 1.2% during the 12 months to June 2012, down compared with a rise of 1.6% through the year to March 2012. This saw the Consumer Price Index (CPI) grow by 0.5% during the quarter and ensures that the inflation rate remains well below the RBA’s target range of 2% to 3%. Underlying inflation was also contained increasing by 0.6% during Q2 2012, taking annual growth to 1.9%.

CASH RATE REMAINS STABLEFollowing a reduction of 50 and 25 basis points in May and June 2012 respectively, the Reserve Bank of Australia (RBA) decided to keep the official cash rate stable at 3.5%, during both their July and August monthly board meetings. The RBA judged that “with inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate”.

AUSTRALIAN DOLLAR SOFTENSOngoing uncertainty over European sovereign debt issues has continued to fuel concerns regarding the global economic outlook. Combined with the slow pace of economic recovery in the United States, this uncertainty saw the Australian Dollar reach a record high in late July 2011, trading at $US110.62 cents, before slipping below parity in December 2011. After regaining value during Q1 2012, trading as high as $US1.08, the Australian Dollar fell below parity in May 2102 due to a flight by investors to safe haven assets as election results in Greece and France further clouded the outlook for the European economy. This has seen the Australian dollar recently trade between $US0.98 and $US1.03.

COLLIERS INTERNATIONAL | P. 2

RESEARCH & FORECAST REPORT | SECOND HALF 2012 | OFFICE | CANBERRA REGION

Source: PCA OMR July 2012/Colliers International Research

Source: Deloitte Access Economics/Colliers International Research

CANBERRA REGION FORECAST WHITE COLLAR EMPLOYMENT GROWTH

CANBERRA REGION NET ABSORPTION V WHITE COLLAR EMPLOYMENT GROWTH

-1,000 -500 0 500 1,000 1,500 2,000 2,500 3,000

Administrative and Support ServicesConstruction

Accommodation and Food ServicesEducation and Training

Transport, Postal and WarehousingWholesale Trade

Agriculture and miningManufacturingOther Services

Rental, Hiring and Real Estate ServicesElectricity, Gas, Water and Waste Services

Health Care and Social AssistanceFinancial and Insurance Services

Arts and Recreation ServicesInformation Media and Telecommunications

Professional, Scienti�c and Technical ServicesRetail Trade

Public Administration and SafetyOverall

6 Mth Net Absorption Canberra Region White Collar Employment

Forecast

-100,000

-50,000

0

50,000

100,000

150,000

200,000

Jul-9

9Ja

n-00

Jul-0

0Ja

n-01

Jul-0

1Ja

n-02

Jul-0

2Ja

n-03

Jul-0

3Ja

n-04

Jul-0

4Ja

n-05

Jul-0

5Ja

n-06

Jul-0

6Ja

n-07

Jul-0

7Ja

n-08

Jul-0

8Ja

n-09

Jul-0

9Ja

n-10

Jul-1

0Ja

n-11

Jul-1

1Ja

n-12

Jul-1

2Ja

n-13

Jul-1

3Ja

n-14

Jul-1

4Ja

n-15

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

• Whitecollaremploymentgrewmarginallyover the first half of 2012 increasing by a total of 2,986 persons. This is slightly below the growth of 3,877 persons recorded in the second half of 2011. By sector:

• PublicAdministrationandSafety,RetailTrade, and Professional, Scientific and Technical Services all had growth of over 1,000 people, well above the average growth of all sectors of 166 people;

• AdministrativeandSupportServices,Construction and Accommodation and Food Services all recorded declines in white collar employment with losses of 978, 687 and 487 persons respectively.

• RetailTradesawthegreatestimprovementfrom the second half of 2011 going from a loss of 299 jobs to an increase in employment of 1,175 persons in the first half of 2012. Overall this is the equated to an increase of 876 persons in the Retail Trade sector.

• PublicAdministrationandSafety,thelargest white collar employment sector in the Canberra region, is forecast to increase by only 141 persons in the second half of 2012. This would equate to an overall increase of 1,519 persons in the sector over the 2012 calendar year.

• DeloitteAccessEconomicshasforecastthat white collar employment will be stable with an overall increase of only 120 persons over the second half of 2012.

Employment Trends and Leasing Demand



Supply• Overthenextsixmonthseightbuildings,

or an estimated 140,704m2 of space, are expected to be delivered in the Canberra region. These include:

• 4NationalCircuit:28,900m2 of space is currently under construction. Owned by ISPT Core Fund, the development has approximately 28% pre-commitment and is anticipated to be completed by the end of the 2012 calendar year.

• TheSt.John’sAmbulancesiteat18 Canberra Avenue, is a new development by the Doma Group fully leased to the Department of Human Services. The site encompasses 9,630m2 and is due for completion in the second half of 2012.

• Thelargestbuildingcurrentlyunderconstruction is the ASIO Headquarters in the suburb of Parkes. At 40,000m2 this space represents 26% of the overall new supply anticipated to be delivered over the next twelve months.

• Overthefirsthalfof2013afurther15,516m2 is expected to be delivered with the refurbishment of 40 Cameron Street. 38% of this project is currently pre-committed (5,834m2).

• Nishi(2PhillipLawStreet)iscurrentlytheonly office development under construction in the Canberra CBD. The only new development anticipated for the CBD until 2014, Nishi is currently 80% (16,800m2) pre-committed to the Department of Climate Change and Energy Efficiency, Australian Competition and Consumer Commission and Clayton UTZ.

• ThenewCentrelinkbuildingistheonlydevelopment currently under construction in the suburb of Tuggeranong. This is the first new development in the area in over 12 months and will comprise 26,000m² of space.

Source: Colliers International Research

CANBERRA REGION CURRENT & MOOTED COMMERCIAL DEVELOPMENT

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Mode 3

, 20-2

2 Lon

sdale

Stre

et

2 King

Stre

et - S

tage 2

Gunga

hlin B

usine

ss Park

- St

age 1

-

Buildin

g 1, G

ozzar

d Stre

et

ASIO H

Q (Bloc

k 1 S

ectio

n 49 P

arkes

),

Betwee

n Con

stitut

ion A

venu

e & P

arkes

Way

3 Molo

nglo

Drive

4 Nati

onal

Circuit

Nishi T

ower

s, 2 P

hillip

Law S

treet

St Jo

hns A

mbulan

ce S

ite, 1

8 Can

berra

Aven

ue

Taxa

tion O

�ce, 4

0 Cam

eron

Stre

et

Block 1

5 Sec

tion 3

0, 28 S

ydne

y Ave

nue

Cente

rlink B

uildin

g, Cow

lisha

w Stre

et

ACMA Buil

ding,

Benjam

in Way

10-12

Lons

dale

Stre

et

1 Can

berra

Ave

nue

Canbe

rra H

ouse

Tower

Secti

on 63

Myuna

Com

plex,

68 -

72 N

orthb

ourn

e Ave

nue

Commited New Build/ Vacant Mooted Development Refurbishment

2012 2013 2014

Nishi, 2 Phillip Law Street CivicThe Nishi Development comprises 21,000 m2 of new space in the Civic precinct. This is currently the only building under construction in the CBD and is scheduled to complete in the second half of 2012.



RECENTLY COMPLETED AND PROJECTS UNDER CONSTRUCTION

Address Precinct Office NLA (m2) Status Estimated Completion Major Tenants Current

Commitment Rate

10 & 12 Mort Street Civic 15,398 Complete 2012

Department of Education,

Employment and Workplace Relations

100%

Mode 3, 20-22 Lonsdale Street Braddon 3,270 Construction 2012 Various 50%

2 King Street - Stage 2 Deakin 2,400 Construction 2012 - 50%

Gungahlin Business Park - Stage 1 - Building 1, Gozzard Street

Gungahlin 1,525 Construction 2012 - 0%

ASIO HQ (Block 1 Section 49 Parkes), Be-tween Constitution Avenue & Parkes Way

Parkes 40,000 Construction 2012 ASIO 100%

3 Molonglo Drive Airport 33,979 Construction 2012 0%

4 National Circuit Barton 28,900 Construction 2012 Attorney General’s 30%

Nishi Towers, 2 Phillip Law Street Civic 21,000 Construction 2012

Clayton Utz, Department of

Climate Change, ACCC

80%

St Johns Ambulance Site, 18 Canberra Avenue

Forrest 9,630 Construction 2012Department of

Human Services100%

Taxation Office, 40 Cameron Street Belconnen 15,516 DA Approved 2013 Hewlett Packard 37%

Block 15 Section 30, 28 Sydney Avenue Forrest 12,905 Construction 2013PriceWaterhouse

Coopers 50%

Centrelink Building, Cowlishaw Street Tuggeranong 26,000 Construction 2013Department of Huma Services

100%

ACMA Building, Benjamin Way Belconnen 5,800 Construction 2013Australian

Communications and Media Authority

100%

10-12 Lonsdale Street Braddon 2,000 Site Works 2013 - 0%

1 Canberra Avenue Griffith 24,500 DA Approved 2014 Spec 0%


MOOTED COMMERCIAL DEVELOPMENTS

Address Precinct Proposed NLA (m2) Status Mooted

Completion Owner

Myuna Complex, 68-72 Northbourne Avenue Civic 52,000 DA Approved Mooted Walker Corporation Pty Ltd

Alexander Buildings, 35 Furzer Street Phillip 20,000 DA Approved Mooted Jure Investment Pty Ltd

Albemarle Building, 45 Furzer Street Phillip 20,000 DA Approved Mooted Jure Investment Pty Ltd

Old ACTTAB Building, 26 Antill Street Dickson 8,000 DA Approved Mooted Amalgamated Property Group

44A Mort Street Braddon 2,500 DA Approved Mooted Mesja Pty Ltd

Gungahlin Business Park-Stage 1- Buildings 2,3&4, Gozzard Street

Gungahlin 2,250 DA Applied Mooted Undisclosed Private Investor

Macquarie Street Carpark Barton 26,000 DA Applied Mooted Doma Group/Morris Property Group

Section 63 Civic 126,000 DA Approved Mooted City West Property Holdings Pty Ltd.

Section 84 Civic 30,000 DA Applied Mooted QIC


Supply Pipeline



Vacancy



CANBERRA REGION VACANCY BY GRADE

CANBERRA REGION TOTAL OFFICE MARKET VACANCY RATE

8.4%

34.9%

12.8% 12.9%11.7%

5.1%

10.7%

24.6%

10.8%

5.0%

10.3%

25.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

A Grade B Grade C Grade D Grade

Vaca

ncy

Rate

Jul-11 Jan-12 Jul-12

9.8%

6.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Jan-

90Ju

l-90

Jan-

91Ju

l-91

Jan-

92Ju

l-92

Jan-

93Ju

l-93

Jan-

94Ju

l-94

Jan-

95Ju

l-95

Jan-

96Ju

l-96

Jan-

97Ju

l-97

Jan-

98Ju

l-98

Jan-

99Ju

l-99

Jan-

00Ju

l-00

Jan-

01Ju

l-01

Jan-

02Ju

l-02

Jan-

03Ju

l-03

Jan-

04Ju

l-04

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Jan-

15

Vaca

ncy

Rate

Total Vacancy Factor 10 Year Historical Average

Forecast

Source: PCA OMR July 2012/ Colliers International Research

CANBERRA REGION – STOCK AND VACANCY BY PRECINCT & GRADE

PRECINCT/GRADE TOTAL MARKET CBD BARTON WODEN OTHER

Stock (m2)

Vacancy Rate (%)

Stock (m2)

Vacancy Rate (%)

Stock (m2)

Vacancy Rate (%)

Stock (m2)

Vacancy Rate (%)

Stock (m2)

Vacancy (%)

Total - All Grades 2,203,009 9.8% 671,722 8.8% 229,819 4.3% 200,055 14.2% 1,101,413 10.0%

A Grade 885,567 10.8% 259,074 6.1% 136,504 4.0% 80,600 0.0% 409,389 18.1%

B Grade 563,380 5.0% 202,544 7.6% 78,629 5.1% 31,046 3.4% 251,161 3.0%

C & D Grade 754,062 12.1% 210,104 13.2% 14,686 2.8% 88,388 31.0% 440,884 5.4%

• TheCanberraregiononceagainsawadecline in the vacancy rate. Total vacancy in the Canberra region dropped further to 9.8% at July 2012, from 10.3% in January 2012. The region also recorded a six month net absorption of 13,066m2.

• VacancyinBartonremainedthelowestof all the major office precincts in the Canberra region in July 2012 at 4.3%, followed by the CBD at 8.8%.

• Only15,398m2 of new supply was introduced to the market over the six months to July 2012. This is substantially lower than the six month 10-year average of 49,769m2.

• Vacancyisforecasttoincreaseto12.7%in July 2013 before decreasing to 12.1% in January 2014. This is due to anticipated completion of 16 new and refurbished buildings with an estimated 218,323m2 of space entering the market over the next 18 months and marginal growth in white collar employment over the same time period.

• ThevacancyrateintheWodenValleyprecinct increased by 1.0% from January 2012 to July 2012. This is due to an increase of 1,337m2 in vacant D Grade stock.

• AGradevacancydecreasedby1.5%and0.7% in the Civic and Barton precincts over the first half of 2012 while B Grade vacancy increased by 2.7% to 7.6% in Civic and decreased by 0.2% to 5.1% in Barton.

• WithintheAirportprecinctthereiscurrently59,818 m2 of vacant space, equivalent to a vacancy rate of 36.0%. If this precinct were removed from analysis the Canberra region would have only 7.62% vacancy overall, below the current vacancy rate of the Sydney CBD



Leasing Market Activity • AverageAGradenetfacerentsdecreased

from $365/m2 pa in January 2012 to $362/m2 pa in July 2012. Average incentives decreased over the six months to July 2012 to range between 9.0% - 10.0% causing A Grade net effective rents to increase from $324/m2 pa to $326/m2 pa, equivalent to a 0.9% increase.

• AverageBGradenetfacerentsdecreasedfrom $290/m2 pa to $283/m2 pa over the first half of 2012 while average incentives remained stable leading to an increase in net effective rents for B Grade stock to decrease by 1.7% from $243/m2 pa to $239/m2 pa.

• Incentivesarelikelytoremainstableacrossboth A and B Grade stock over the second half of 2012.

• AGradeneteffectiverentsareanticipatedto increase 0.6% to July 2013 while B Grade stock will decrease by 1.3% over the next 12 months.

AVERAGE INCENTIVE RANGE

Grade Q4-2011 Q4-2011 Q2-2012 6-month Forecast

A Grade 9.5 - 10.5% 9.5 - 10.5% 9.0 - 10.0% Stable

B Grade 12.5 - 17.5% 12.5 - 17.5% 12.5 - 17.5% Increasing



CANBERRA OFFICE NET EFFECTIVE RENTS

$335$317 $315 $324 $326 $328 $329

$241 $239 $237 $239 $236 $247 $244

$0

$50

$100

$150

$200

$250

$300

$350

$400

Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

B GradeA Grade

Forecast

10 – 12 Mort Street, Civic15,477m2 of space was let to the Department of Education, Employment, and Workplace Relations in this newly refurbished building. This was the largest commercial lease started in the six months to June 2012 in the Canberra region.



Caroline Chisholm Centre, 57 Athllon Drive, BelconnenThe sale of the Caroline Chisholm Centre was one of two major sales over the first half of 2012 to a foreign entity. Foreign investment in the Canberra region has reached $308 million over the six months to June 2012.

AVERAGE YIELD RANGES

Grade Q2 2011 Q4 2011 Q2 2012 Change in Yields since Q2 2011

A Grade 7.25% - 7.75% 7.25% - 7.75% 7.25% - 7.75% Stable

B Grade 9.00% - 10.00% 9.25%-10.25% 9.25%-10.25% Stable


Investment Market Activity• Overthefirsthalfof2012fouroffice

buildings have transacted totalling $377.8 million well over double the total transactions over the entire 2011 calendar year.

• Thesaleof50MarcusClarkeStreetwasthe largest sale recorded in the Canberra region over the past four years. This sale represented approximately 49% of total sales volume for the first half of 2012.

• Thesaleofa50%stakeintheCarolineChisholm Centre for $83 million was the largest sale of secondary stock over the first six months of 2012. It represented a capital value of $4,125 per square metre and an equivalent reversionary yield of 8.67%.

• Approximately82%ofsalesvolumescamefrom foreign purchasers over the first half of 2012. This is the highest volume of foreign transactions over the past four years.

• YieldsforbothAandBGradeassetshaveremained stable over the last 12 months to July 2012, ranging between 7.25% – 7.75% for A Grade and 9.25% - 10.50% for B Grade yields.

• YieldsintheCanberraregionareforecastto continue this trend over the rest of the year to 2013.



CANBERRA CBD A GRADE YIELDS

CANBERRA REGION A GRADE YIELDS

5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

10

2005 2006 2007 2008 2009 2010 2011 2012

Equi

vale

nt R

ev. Y

ield

(%)

5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

10

2005 2006 2007 2008 2009 2010 2011 2012

Equi

vale

nt R

ev. Y

ield

(%)



Source: IPD Australia/Colliers International Research

CANBERRA CBD TOTAL OFFICE RETURNS

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12

Capital Return Income Return


CANBERRA REGION INVESTMENT SALES BY BUYER TYPE

11%

56%

100% 100%

18%

33%

82%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012

Institution Private Foreign Government

CAPITAL RETURNS CONTINUE TO GROW• AccordingtoIPDAustralia’sProperty

Investment Digest, the Canberra CBD experienced marginal positive growth in capital and total returns over the March 2012 quarter.

• Capitalreturnsincreasedby0.5%perannum in March 2012, up from -0.9% in the December 2011 quarter. Income returns decreased by 0.1% to 9.0% over the same time period taking total returns to 8.0% per annum.

• AnnualtotalreturnsforSecondarygradeassets in the Canberra CBD increased over the quarter by 1.6% to March 2012 to 4.2%, while annual total returns for Prime grade assets increased 0.1% to 9.2% over the same period.

FOREIGN INVESTOR DEMAND HIGH• Overthepastsixmonthsapproximately

85% of sales volumes have been from foreign purchasers.

• Thelargestpurchaseoverthefirsthalfof2012 by a foreign entity has been the sale of 50 Marcus Clarke Street to CIMB Trust Capital for $225.89 million

• Whilethevalueofacquisitionsbyprivateinvestors appears to be considerably lower over the last six months, it is only 12.1% below the value of transactions made by the same group over the first six months of 2011.

Investment Analytics



Recent Market Transaction ActivityLEASING ACTIVITY

Address Suburb Start Date NLA M² Tenant

32 Corinna Street Phillip 7/07/2012 1,710Department of Families, Housing, Community Services and

Indigenous Affairs

Canberra House, 40 Marcus Clarke Street CBD 1/05/2012 173 Molonglo Group Pty Ltd

Group Of Eight House, 101 Northbourne Avenue Turner 30/09/2012 190 APMG Australasia

18 Lonsdale Street Braddon 278 Unknown Lessee

Cooyong Centre, 1-3 Torrens Street Braddon 30/03/2012 204 Dowse Projects Pty Limited

10-12 Mort Street CBD 25/03/2012 15,447 Department of Education, Employment and Workplace Relations


INVESTMENT SALES ACTIVITY

Address Suburb Sale Date* Sale Price Building

AreaCapital Value

Market Yield** Vendor Purchaser

Penrhyn House, 2 - 6 Bowes Street Phillip Jun-12 $14,000,000 12,622 1,109 11.05% McGrathNicol Quintessential Equities Pty. Ltd.

Caroline Chisholm Centre, 57 Athllon Drive

Belconnen Apr-12 $83,000,000 40,244 4,125 8.67%Korda Mentha (50% share)

Frasers Commercial Trust

50 Marcus Clarke Street CBD Mar-12 $225,000,000 40,201 5,619 7.37% Walker CorporationCIMB Trust Capital -

Australian Office Fund No. 1

10- 12 Mort Street CBD Jun-12 $55,800,000 15,447 3,612 10.19% GPT Group Growthpoint (AUS)




Outlook With the large amount of supply expected to come online in the next six months (140,704m²), and more subdued white collar employment growth forecast, vacancy rates in the Canberra region are anticipated to increase, peaking at 12.7% in July 2013 and will then gradually decrease over the following 18 months.

The vacancy rate is expected to rise significantly for secondary stock but remain stable and potentially decline for A Grade space. As a result, Colliers International forecast that there will be marginal increases in A Grade net effective rents over the next two years as tenants move out of secondary stock. Incentives for the A Grade office market will remain stable during the same time period. Over the short term, secondary grade buildings are anticipated to have stable incentive levels and record a contraction in net effective rents.

The investment market will be slightly more subdued over the second half of 2012 however has already achieved a higher volumes of sales than it has over the past two years combined. It is expected that leasing activity will remain buoyant as government and private tenants continue their flight to quality A Grade space.

COLLIERS INTERNATIONAL

Ground Floor,21-23 Marcus Clarke Street,Canberra ACT 2600TEL 02 6257 2121FAX 02 6257 2937

RESEARCHER

Margaret BowdenAnalyst/ResearchTEL 03 9940 7279FAX 03 9092 1479

Paul PowderlyState Chief ExecutiveTEL 02 6257 2121FAX 02 6257 2937

522 offices in62 countries on6 continentsUnited States: 147 officesCanada: 37 officesLatin America: 19 officesAsia Pacific: 201 officesEMEA: 118 offices

• $1.5 billion in annual revenue

• 1.2 billion square feet under management

• Over 12,300 professionals

Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections.

Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. COPYRIGHT - Colliers International 2012.

Accelerating success.



COLLIERS INTERNATIONAL | P. 11 www.colliers.com.au/research


Canberra cbd office research forecast report second half 2012

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