SOUTH Australia’s short-term economic prospects are looking up as the impact of investing in hi-tech jobs becomes ever more apparent says a report out today.
Which translates to good news for the local office market says Bradley Speers, CBRE national head of research and author of Space, subs and science: is Adelaide becoming Australia’s smart city?.
Don’t worry, SA is not destined to remain slow and steady as has been its historical growth tendency, says Mr Speers
“ANZ’s Stateometer for the March 2019 quarter revealed SA is the only state economy growing above trend and that growth is accelerating,” he said.
SA’s long-term prospects also look favourable, with Adelaide set to benefit from providing the majority of Australia’s defence manufacturing and technology research, development and investment over the next two decades.
“This and other investment in smart jobs should help curtail the brain drain that has intensified over recent years. Negative net interstate migration is a key reason why SA’s economic growth typically underperforms other states.”
But population remains pivotal Mr Speers warned.
“Net interstate outflows will need to become sustained inflows if the state is to shake the tag of slow and steady.”
If achieved, the Adelaide office market will benefit from stronger growth in white collar employment than any time over the past 15 years he said.
Stunningly, the last time SA recorded a year of positive net interstate migration was 1991, with negative net interstate migration reducing population growth by 0.24 per cent per year ever since with SA’s population aged between 15 and 34 declining by one-third from 1986 to 2016.”
“A lot are leaving still, once they have gone overseas or interstate, they tend to stay
“It’s about bringing these smart jobs here and stopping people leaving,” Mr Speers , pictured, said.
“The space agency (at Lot Fourteen) is just getting started. You have to look where Adelaide is going to be in five years time. You will see an improvement and in 10 years the whole business model is looking up to see a knock on from the (incoming) smart jobs and its manufacturing core.”
Despite the coming surge in defence jobs to SA, the state government could be doing much more to aid the transformation Mr Speers said with the burgeoning medical precinct running along the Adelaide CBD’s northwest corner, not as well known nationally as perhaps many South Australians might think.
“The state government should be making SA more visible to other states. It promotes tourism but really is not promoting the lifestyle and opportunities here. It needs a strong marketing campaign.”
SA is not necessarily a low growth economy Mr Speers said. Don’t forget per capita.
The city’s prime office market should deliver risk adjusted returns superior to Australia’s other capitals over the longer term the report claims and says annual growth in state final demand on a per-capita basis has outperformed other states over the past 20 years.
A similar outlook generated by defence, resources and technology research, development and investment, is likely over the next two decades
“This will lead to stronger tenant demand, generating rental growth that will boost the total returns generated in the relatively high-yielding prime CBD Adelaide office market.
“Historically, this market has delivered risk-adjusted returns superior to other capitals and there is little reason to believe this trend cannot be sustained long term.”
CBRE office leasing director Andrew Bahr said the take up of space from the new incoming groups had already begun with Adelaide’s prime stock divided into assets built post 2006 or stock built pre 2006 which had received upgrades but typically offered smaller floor plates.
“Looking at the new prime sector in isolation, the vacancy rate is now less than 3 per cent versus 20 per cent for old prime stock.
“With the take up of new space continuing, this will flow into the other sectors of the market and lead to stronger net effective rent growth over the next five years,” Mr Bahr said.
“Similar to growth in the SA economy, Adelaide office market total returns have demonstrated low volatility. However, Adelaide’s prime CBD office yields are typically higher than other capital city office markets,” Mr Speers said.
“This has contributed to Adelaide delivering higher total returns than all other CBD markets except Perth since 2001 and the best risk adjusted CBD returns, ahead of Melbourne and Sydney.”
CBD Office Market will Benefit from Coming Tech Boom Says CBRE Report by Richard Evans originally appeared in The Advertiser 18 June 2019.
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