The prime office rental markets of Sydney and Melbourne will experience some of the fastest growth in world during 2019, according to Knight Frank.

The firm's Global Outlook Report 2019 indicates rents are expected to rise 10.1 per cent in Sydney and 8.6 per cent in Melbourne.

It follows prime rent increases of 11.9 per cent in Sydney and 13.9 per cent in Melbourne over the past year.

According to Knight Frank, both markets are experiencing tight supply due to employment growth and relatively low levels of development completions in recent years.

Knight Frank Head of Research and Consulting and Partner, Ben Burston, said a subdued pipeline of development completions in 2019, along with a sustained demand-side momentum meant there was a compelling case for rapid growth.

"Last year saw a supply crunch in both Sydney and Melbourne, with dwindling availability and robust absorption, particularly in Melbourne, driving a surge in office rents," he said.

Source: Global Outlook Report 2019.

“While we expect the pace to moderate from the 2018 level, the markets will still be among the world’s fastest growing, and this will see them continue to attract the attention of a broad range of cross-border and domestic investors."

The report found that while all cities are feeling the impact of slower economic growth and geo-political risks, some are benefiting from robust demand from tech firms for business space.

Knight Frank Partner and Head of Office Leasing, David Howson. Source: Knight Frank

According to Knight Frank, this is coinciding with fewer major developments reaching completion, as the uncertain political environment has deterred some developers from building in recent years. 

Knight Frank Partner and Head of Office Leasing, David Howson, said leasing market conditions will be challenging for occupiers in 2019.

"Rents have risen substantially and businesses face relatively few options when seeking new premises," he said.

"At the same time, the pressure to recruit talent and enter new markets is pushing them to address their property needs."

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