Home Property Australia Office highs and lows

Office highs and lows

  • August 10, 2021
  • by Property Australia

Despite demand for office space defying expectations, policymakers have work ahead to reactivate our CBDs says the Property Council.

 

Three key takeaways

  • The Property Council’s latest biannual Office Market Report records an aggregate vacancy rate of 11.9% for all office markets for the six months to July 2021, up just slightly from 11.6% in January
  • Overall CBD vacancy edged higher, from 11.1% to 11.2%; non-CBD markets recorded a small vacancy increase, from 13.0% to 13.6%
  • A total of 401,605 sqm of stock will come online in CBD markets in the second half of 2021, more than one and half times the historical average of 238,915 sqm.

 

The latest Office Market Report, which measures the levels of leased space, underscores the “remarkable resilience” of the sector, says Property Council chief executive Ken Morrison.

“Excluding Melbourne, demand for CBD office space grew by 85,000 sqm over the six months, a result that few would have predicted given the impacts of the pandemic.”

The picture wasn’t so pretty for Melbourne: demand for space in the Melbourne CBD fell by more than twice as much as its previous largest six-monthly fall on record, increasing to 10.4 per cent vacancy. Around 220,000 sqm of new supply is coming online over the next six months.

Morrison says Sydney was the only other CBD market to see vacancy increase, but this was due to new office space entering the market. “Demand actually grew by 27,000 sqm,” Morrison notes.

Vacancy in other capital cities all declined: Brisbane to 13.5 per cent, Perth to 16.8 per cent, Adelaide to 15.7 per cent and Canberra to 7.7 per cent. Vacancy results in non-CBD markets showed a broader spread, with half increasing and half declining. In aggregate, demand for office space in non-CBD markets was flat.

 

CBD vacancy change, January to July 2021Picture1-Aug-10-2021-04-23-28-44-AM

Net absorption – the measure of demand – was -11,742 sqm over the six months, compared with the historical average is 147,051 sqm. The markets with the strongest increases in net absorption were Canberra, Sydney CBD and Perth CBD.

A total of 401,605 sqm of stock will come online in CBD markets in the second half of 2021, more than one and half times the historical average of 238,915 sqm. Of this, 55 per cent will be in Melbourne, 14 per cent in Perth, 11 per cent in both Canberra and Brisbane, and nine per cent in Sydney.

Morrison notes the challenge ahead for policymakers to restore Australia’s economic engine rooms.

“Our CBDs support millions of jobs and generate hundreds of billions of dollars in economic activity. Measures to accelerate post-lockdown CBD recovery will play an important part in our overall economic recovery,” he says.

“Once we’ve overcome the immediate threats to public health, it is critical that building owners and employers work together with all levels of government to get our CBDs firing on all cylinders once again.”