Sydney and Melbourne office markets lead the nationDemand for office space in the ‘hot spot’ cities of Sydney and Melbourne roars along, while the national office vacancy rate creeps up to 10.5 per cent.The latest Property Council of Australia Office Market Report highlights the dramatic changes underway throughout the Australian economy.”Demand for offices in Sydney and Melbourne is roaring along – and that is good news for Australia as we face the end of the mining investment boom,” says Property Council chief executive Ken Morrison.While demand increased for the fourth consecutive period, there was a slight increase in national office vacancy – from 10.4 per cent to 10.5 per cent.Morrison says the “almost static” national vacancy rates “hides what is happening below the surface”, with the economy in transition and Sydney and Melbourne reclaiming their historic positions as engine rooms of the economy.Office vacancies in Brisbane, Perth, Canberra, Adelaide and Darwin are more than double that of Sydney, and an additional 394,243 sqm of space was added to the national office landscape over the past six months – 25 per cent higher than the historic average.Sydney continues to have the lowest vacancies and strongest demand in the nation, as well as a strong pipeline of new stock with 243,126 sqm expected in 2016.Melbourne’s vacancy rate fell to 7.7 per cent – second only to Sydney – off the back of strong demand. With 71,768 sqm of new supply expected over the next year and none forecast for 2017, this market will remain tight.The fall in Hobart’s vacancy rate coincides with major regulatory changes, including the passage of the Tasmanian Planning Scheme and proposed changes to the Building Act amendments.Perth saw its first positive net absorption (42,387 sqm) after three years of negative demand, which helped to offset the large spike of an additional 113,463 sqm of new office stock added in the past six months.Brisbane’s vacancy rate remained steady. The city is expecting an additional 192,281 sqm in office space to come online during 2016 and is facing near record levels of new supply.Adelaide continues to suffer from negative demand with CBD vacancies reaching as high as 20.6 per cent for D grade property.Darwin reported the worst result in the nation with vacancies increasing from 10.9 per cent to 20.7 per cent. This was the result of an economic convergence of increasing supply and lower demand. Despite Canberra’s vacancy rate falling from 15.3 per cent to 14.9 per cent, the city’s vacancy rate remains one of the nation’s highest. Vacancy rates for D grade properties has hit 30 per cent.For more on the latest Office Market Report, click here.
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