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Steady as she goes: Office vacancy unchanged

ACT Executive Director, Adina Cirson has said the Property Council of Australia’s latest Office Market Report shows vacancy rates have remained steady over the past six months in the Canberra market, with the commercial leasing sector remaining confident that the market will hold steady overall, despite demand dipping into the negative.

“Over the last six months to July 2019, Canberra’s overall vacancy rate remained steady at 11 per cent well below where the vacancy rate sat 18 months ago at 13.3 per cent, with negative demand offset by withdrawals,” Ms Cirson said.

“Overall our office market vacancy rates are third lowest behind Melbourne and Sydney CBD markets, with our with the hottest properties being prime office product, highlighting the private sector demand for office environments that assist in staff retention by creating attractive workplaces for staff.”

A Grade vacancy has decreased significantly over the last 12 months from 8.6 per cent – now sitting at 5 per cent – with B Grade stock recording a slight bump up from 12.1 to 12.4 per cent, over the last six months. The vacancy rate in Civic decreased from 12.5 per cent to 12 per cent due to 3,251sqm of net absorption.

“With over 50 per cent of ACT office market tenanted by the Commonwealth Government, absorption can often be a little slower in a Federal Election year, however there seems to be a continuation for the Commonwealth to seek efficiencies through their leasing strategy. We know the Commonwealth will continue to seek occupational density targets, by reducing ‘empty desk space’ with some 11,000 desks currently across their tenancies. Improving fit outs and incentives before locking in longer term leases will be a goal – meaning the next 12 months will continue to be busy,” Ms Cirson said.

“We have once again seen a vacancy increase in C Grade office stock, now sitting at over 20 per cent, reminding us of the importance of strategic planning and creating an environment where building owners are better able to refurbish or undertake adaptive re-use for tired office stock. 

“Unfortunately with the pain being felt from tax reform being undertaken by the government, commercial building owners are struggling to find the funds to re-invest in their buildings – with commercial rates having doubled since the commencement of tax reform, rising another 6 per cent this year, and now more than 9 times more than residential rates,” Ms Cirson said.

“We will continue to engage with the ACT Government on how we can reduce the disproportionate impact commercial rates increases are having on investment in the Capital and seek to create greater certainty about where commercial rates are headed as they commence a mid point review in the 20 year reform agenda,” Ms Cirson concluded.

To view select Office Market Report data series, visit the Property Council’s Data Room

Media contact:  Adina Cirson |M 0429 579 972|E acirson@propertycouncil.com.au

Office Market Report July 2019

Analysis – Canberra market

Headline comments:

  • Canberra vacancy remained steady over the period
  • Demand was negative but was offset by net withdrawals
  • A Grade was the only grade to record single digit vacancy
  • D Grade was the only grade to record positive demand
  • There is some space in the pipeline over the next 18 months

 

Vacancy analysis:

  • Vacancy remained at 11.0 per cent over the six months to July 2019
  • Net absorption over the period was -20,922sqm
  • 10,796sqm was added while 34,968sqm was withdrawn
    • A Grade – Vacancy decreased from 5.4 per cent to 5.0 per cent due to 17,300sqm of withdrawals
    • B Grade – Vacancy increased from 12.1 per cent to 12.4 per cent due to -3,322sqm of net absorption
    • C Grade – Vacancy increased from 19.8 per cent to 20.5 per cent due to -16,580sqm of net absorption
    • D Grade – Vacancy decreased from 17.7 per cent to 16.3 per cent due to 1,162sqm of net absorption
  • Civic’s vacancy rate decreased from 12.5 per cent to 12.0 per cent due to 3,251sqm of net absorption
  • Vacancy in the Non Civic market increased from 10.4 per cent to 10.6 per cent due to net absorption of -24,173sqm

 

Future supply:

  • 15,934sqm will be supplied in the second half of 2019
  • 84,898sqm is due to come online in 2020
  • 94,000sqm of space is mooted

 

Key market indicators, Canberra (aggregate)

Grade

Vacancy,

Jul 19 (%)

Vacancy,

Jan 19 (%)

Net absorption, 6 months to

Jul 19 (sqm)

Net absorption, 12 months to

Jul 19 (sqm)

A

5.0

5.4

-2,182

26,040

B

12.4

12.1

-3,322

5,726

C

20.5

19.8

-16,580

-27,366

D

16.3

17.7

1,162

1,950

Total

11.0

11.0

-20,922

6,350