Another year draws to a close and from a tenants perspective the market continues to tighten in terms of availability and affordable options.

Whilst the supply side particularly in Melbourne is reducing, global and political uncertainty has just about kept a check on rental inflation and has also assisted in maintaining reasonable levels of market incentives as landlords seek to secure and retain quality tenants for their buildings. Attractive deals still abound albeit choice is becoming restricted.

Agents report that overall enquiry in the last quarter has been soft seeing the volume of deals drop during one of what is normally the busiest periods of the year. UBS recently reported that “a significant portion of the Australian stock market has been battling unusually subdued demand conditions for up to 18 months”. Factors including a moderately tight monetary policy, a strong A$ and overseas sovereign debt fears have all conspired to weaken confidence. The property market traditionally lags behind the financial markets in terms of cycles not being so quick to react. Assuming we do not see any further bad news emanate from overseas then it is likely over the next 12-24 month period will see substantial rental growth and the whittling away of market incentives.

The next six months should witness increased tenant activity as confidence improves and as companies realise that unless active measures are taken to secure accommodation they will miss out. We are hearing a number of reports of organisations being “gazumped” in their bid to secure new premises and no doubt such tales will become more prolific as the supply side dwindles and funds remain scarce for new development.