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Melbourne demand surges as Australian office vacancies tighten

The Melbourne CBD is the standout performer of a tightening Australian office landscape according to the latest Australian Office Market Report released by the Property Council of Australia.

Office market vacancy rates across Australia fell from 9.6 per cent to 9.1 per cent over the six months to July 2018, with Melbourne’s office vacancy rate hitting a 10 year low of 3.8 per cent (down from 4.6 per cent in January 2018) – the lowest vacancy rate of all Australian CBDs. 

All of the CBD markets record declines in their vacancy rates during the period, ranging from 3.6 per cent in Melbourne; 4.6 per cent in Sydney; 12.1 per cent in Canberra; 14.7 per cent in Adelaide; 14.6 per cent in Brisbane and 19.4 per cent in Perth. 

All CBD markets had lower vacancy rates than the same time 12 months ago with the exception of Canberra which increased from 11.6 per cent in July 2017. 

‘Office vacancy rates are a good measure of economic performance, and Melbourne is clearly the stand-out performer of the nation,’ said Ken Morrison, Chief Executive of the Property Council. 

‘Melbourne is our fastest growing city and best performing economy which in turn is creating strong jobs growth and demand for office space at more than twice its historical average. 

‘Most of the country’s future office supply over the next three years will be built in Melbourne, which is exactly where you want it – responding to strong demand. 

‘While Melbourne is performing strongly, the Sydney market has also tightened further, with a CBD vacancy rate of 4.6 per cent, down from 4.8 per cent six months ago,’ Mr Morrison said. 

The results for Brisbane show a welcome return in market activity with vacancy across the CBD dropping from 16.1 per cent to 14.6 per cent. 

Perth has passed its peak vacancy, with both the CBD and West Perth recording drops in vacancy, although at 19.4 per cent the CBD vacancy rate in Perth is still above the national average.  

Adelaide’s CBD office vacancy rate has dropped for the third consecutive period, with fringe vacancy also dropping. There has been a strong flight to quality in the Adelaide CBD with premium vacancy dropping to 2.8 per cent, the lowest vacancy level since July 2012. 

‘Across the country we are seeing a shift towards premium office quality, but a more challenging outlook for lower grades of stock,’ Mr Morrison said. 

‘The challenge for planners and owners is to come up with solutions to encourage the utilisation of secondary office stock to help meet future demand and support vibrant and affordable commercial districts in both CBD and non-CBD areas,’ Mr Morrison said. 

The non-CBD vacancy rate increased slightly from 8.9 per cent to 9 per cent over the six months to July 2018. The top three non-CBD markets are East Melbourne (3.1 per cent), Parramatta (3.2 per cent), and Macquarie Park (5.4 per cent). 

Five of the top ten performing non-CBD markets are in New South Wales:  Parramatta, Macquarie Park, North Sydney, Chatswood and Crows Nest/St Leonards. 

For a comprehensive range of Australian property industry data visit the Data Room at http://research.propertycouncil.com.au/data-room

 

Media contact:  Matt Francis | M 0467 777 220 |  E mfrancis@propertycouncil.com.au