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With many of the travel restrictions of the COVID pandemic firmly in the rear-vision mirror, Australia’s migration figures have lifted once again, bringing with it more demand for office spaces.
The Property Council’s latest office market report provides a positive outlook for some of the less traditional office markets throughout the country, according to Ray White Commercial’s head of research Vanessa Rader.
Ms Rader noted that occupancy data had been hampered by supply increases, yet, for locations that have enjoyed strong levels of population growth, significant gains can be seen.
The top five Australian locations for office demand are West Perth, Brisbane central business district, Brisbane fringe, the Gold Coast and Parramatta. Queensland and Western Australia’s domination of this trend are indicative of the two states being the recipients of the highest rates of interstate migration.
Brisbane CBD has enjoyed the greatest volume of net absorption — 44,690 square metres for the six-month period, which, coupled with limited new supply additions, has reduced vacancies 14 per cent.
Brisbane fringe has seen 22,461 square metres of take-up, followed by the Gold Coast’s 6,901 square metres, while west Perth’s 11,449 square metres of take-up has seen vacancies reduced from 22.1 per cent just 18 months ago to 15.3 per cent now, highlighting how non-CBD markets remain favourable in these states.
Moreover, Perth’s CBD is enduring a period of high supply while attracting 13,302 square metres of demand. Vacancy rates sit at 15.8 per cent, an encouraging level for the market at a time when the development pipeline is heavy.
In contrast, the outlook in Sydney and Melbourne is bleaker. The NSW capital’s CBD has had 100,000 square metres of stock enter the market despite just 21,692 square metres of absorption for the six months to July 2022, while vacancies have climbed to 10.1 per cent.
Gains in the sublease space are anticipated to increase as tenants continue to grow and update their hybrid office models, while premium quality stock offerings have been instrumental in attracting tenants away from the suburbs and into the CBD.
Down in Melbourne, the market has not fared at the level of Sydney, with 60,000 square metres having been added to existing stock. However, less than 2,000 square metres of take-up has occurred, which has ballooned vacancy rates to 12.9 per cent.
The city’s sublease market vacancy rate of 2.6 per cent is expected to rise, further cementing it as the highest in the country. Another blow to the Victorian capital is that St Kilda Road houses the highest office market vacancy rate in the country at 20.9 per cent.
On the flip side, vacancy rates in Southbank have decreased since January 2022, now resting at 15.5 per cent. Furthermore, the East Melbourne market continues to reign supreme as the market with the highest occupancy rate, although recent performances from the Gold Coast — where vacancy rates have fallen to 8.1 per cent — present a great challenge to this region.
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