Australian office vacancies have edged higher as COVID-19 has reduced demand for office space while significant new supply has entered the market over the six months to January 2021. The Property Council Australian Office Market Report for January 2021 reveals that office vacancy rates increased across most capital city markets surveyed.
Office vacancies are calculated on whether a lease is in place for office space, not whether the tenant’s employees are occupying the space or working from home.
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A market-by-market wrap up is below:
Sydney CBD
Sydney CBD vacancy increased from 5.6 per cent to 8.6 percent over the six months to January 2021. The CBD received almost 110,00sqm of new supply and net absorption of -54,671sqm, bumping the vacancy rate up to its highest level in seven years.
“Sydney CBD’s office market continues to see a tightly held office market, with vacancy rates remaining comfortably below ten percent. Sydney has close to 280,000 sqm of office space coming online over the next two years, so it is an ideal time to secure prime office space for considered future tenants.” said NSW Executive Director, Jane Fitzgerald.
Melbourne CBD
Melbourne’s office vacancy rate has increased to 8.2 per cent over the last six months, reflecting a significant increase of new office supply and COVID-related subleasing trends.
“As employees return to the office in line with the State Government’s health advice, employers will be in a more informed position over the coming months about their future workspace needs. Our Office Market Report shows there will be plenty of quality options throughout the CBD and central city with the safety and flexibility the modern workplace requires.” said VIC Executive Director, Danni Hunter.
Brisbane CBD
Brisbane’s CBD vacancy rate increased marginally, from 12.9 per cent in July 2020 to 13.6 per cent in January 2021, and the vacancy in Brisbane’s fringe market increased from 14.3 per cent to 16.6 per cent over the same period.
Chris Mountford, Queensland Executive Director of the Property Council, said, “The figures show Queensland’s office market has fared remarkably well during this tumultuous time.”
Canberra
Canberra’s overall vacancy rate held steady at 10.1 percent, down from 13.3 per cent recorded in January 2018, highlighting the continued tightening in the market. Canberra was the only capital city to not experience an increase in vacancy and the only city to record higher than average demand.
“This is good news for the ACT especially off the back of 2020. It is pleasing to see the Canberra market is now sitting below the average Australian office vacancy rate.” said ACT Executive Director, Adina Cirson.
Adelaide CBD
The Adelaide CBD vacancy rate increased to its highest level since July 2017, increasing from 14.3 to 16.0 per cent over the six months to January 2021. On a positive note, vacancy in the Adelaide Fringe market decreased from 14.4 to 11.6 per cent, the lowest level since July 2018.
“While COVID-19 had impacted demand, this occurred at the same time as a large increase in the amount of new space coming into the market. In fact, new supply in the Adelaide CBD had a much bigger influence on vacancy rates than reduced tenant demand from COVID-19,” said SA Executive Director, Daniel Gannon.
Perth CBD
Perth’s office vacancy rate has increased with the benchmark figure hitting 20 per cent. One fifth of Perth CBD office stock is considered vacant, marking a 1.6 per cent increase since July last year.
Sandra Brewer, Western Australia Executive Director of the Property Council, said, “Perth’s CBD office vacancy rate was already at 18.4 per cent in July 2020, and West Perth’s at 22.1 per cent – demand in the office market has been a challenge for Perth since 2016.”
Hobart CBD
Despite the significant impacts of the pandemic, office vacancy in Hobart increased from 4.1 per cent to just 5.1 per cent in the year to January.
“To have emerged from 2020 with the tightest office market in the country is a great vote of confidence in the Tasmanian economy and the Hobart CBD. Pleasingly, less than a third of the rise in vacancy was due to reduced demand from tenants – the rest was from new office space entering the market.” said TAS Executive Director, Rebecca Ellston.
Darwin CBD
The Darwin office market vacancy has increased from 16.8 per cent to 19.7 per cent over the year, due to significant supply additions and negative demand.
“The results indicate that we are seeing pockets being filled up in better quality buildings, leaving the C grade buildings at a concerning 56.4 per cent vacancy. Keeping the Cities Deal moving is also a major priority in activating vacant spaces, along with a stronger economy and a population growth.” Said NT Executive Director, Ruth Palmer.
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