Vacancy rate climbs with Adelaide’s modernising skyline – but what’s behind the numbers?

Wednesday 1 February 2024

MEDIA RELEASE

Vacancy rate climbs with Adelaide’s modernising skyline – but what’s behind the numbers?

Underwritten by the fifth consecutive increase in new high-quality CBD office supply, Adelaide’s vacancy rate has continued to climb in in the latest Property Council Office Market Report.

Adelaide’s CBD recorded a vacancy rate of 19.3 per cent – up from 17 per cent – with the delivery of a new generation of office accommodation in 2023 such as Charter Hall’s 60 King William, Cbus
Property’s 83 Pirie Street and Walker’s Festival Tower.

Property Council’s South Australian Executive Director Bruce Djite said that even though Adelaide’s vacancy rate has been trending upward, it is not unexpected given Adelaide’s
modernising skyline.

“The last time vacancy was this high was in 1997, however at that time there was no additional supply,” Mr Djite said.

“What’s driving vacancy in Adelaide today is fundamentally different, and where it is concentrated and why is key.

“Adelaide is the only CBD market in Australia with positive demand and where supply is the main driver of vacancy rates.

“It’s a tale of two cities with vacancy concentrated in the backfill that follows tenants cycling up into new generation office space, and of course the structural vacancy inherent in older less attractive premises whose investment fundamentals might not yet be ripe for redevelopment.”

“With about 60 per cent or more of Adelaide’s office stock profile over 30 years old, it is encouraging to see new modern offices refresh our city as companies demand quality, productive space for employees.”

“Investors should seriously consider making a play in Adelaide for sites with office stock passed its used by date, especially with the latest Commsec State of the States report finding that the South Australian economy is the best performing in Australia.”

Adelaide Economic Development Agency’s Economic Research Advisor, Jordon Tomopoulos said new and improved office towers encourage new and expanding businesses to the city.

“The increase in new floor space in Adelaide is being snapped up quickly as the number of businesses and employees in the city reaches historic levels.

“The new supply of premium A grade stock has a snowball effect on the economy, as it encourages lower grade stock improve their offering through renovations. This is currently occurring at 45 Pirie Street and 100 King William Street. The upgrading of existing stock creates more jobs which inevitably benefits local businesses.

“A growing population of office-based workers continues to rise off the back of industries such as professional, financial and technical services as well as public administration and education.

“New stock creates jobs, these jobs help small businesses, confident small businesses employ staff who need service businesses, and this snowball effect expands service firms who desire new premium office space to attract talent in this tight labour market.”

Key findings in the January 2024 Office Market Report for Adelaide include:
• Vacancy in Adelaide increased from 17 per cent to 19.3 per cent.
• Adelaide was the only CBD market in the OMR to record positive demand.
• A grade stock recorded the highest levels of demand (3,945 square meters).
• Adelaide’s CBD net supply rate (2.9 per cent) is the highest in the nation