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High levels of office supply have been heralded as increasing Australia’s commercial office vacancy rates, rather than a lack of demand, according to new data from the Property Council of Australia (PCA).
The council’s latest Office Market Report revealed that demand for office space increased by 0.1 per cent across Australia’s CBDs in the last six months. It found Australia’s overall vacancy rate increased, though outlining this was born from strong office construction activity with “the supply of office space exceeding the historical average in five of the last six half-yearly reports”.
PCA chief executive Mike Zorbas explained, “This is the third six-month period of positive demand nationally for office space in our CBDs.”
Across the country, four capital cities saw vacancy rates climb between last July and January 2023. National capital Canberra’s rate increased from 8.6 per cent to 8.9 per cent, Sydney’s rose by 1.2 per cent to 11.3 per cent, in Melbourne 13.8 per cent of office spaces remain vacant as opposed to 12.9 per cent last July, and Adelaide reported a nearly 2 per cent rise from 14.2 per cent to 16.1 per cent last month. All remaining capital cities reported declines with Hobart’s vacancy rate of 2.5 per cent the lowest.
“While new supply has increased total vacant space in some areas, these latest numbers are a vote of confidence in our CBDs,” he said.
Additional “healthy signs” for the nation’s office sector is the decrease in sublease vacancies in both Australia’s CBD and non-CBD markets.
Sydney and Melbourne are the only capital cities not below the historical average for sublease vacancies, even with the Victorian capital reporting a 0.7 per cent decrease in sublease space. Darwin and Hobart have no available sublease space.
Signalling out Brisbane for its strong performance in the latest report, Mr Zorbas outlined that “tenant demand outstripped supply, pushing the vacancy rate down from 13.9 per cent to 12.9 per cent.”
Casting an eye over the future, he said the city boasts “100,000 square metres of office space coming online in Brisbane over the next three years, of which 72 per cent has already been pre-committed.”
The Property Council’s Office Occupancy survey from November further ratified that occupancy across the country has climbed as more employees return to the workplace. The survey revealed Perth offices were at 80 per cent occupancy compared to pre-pandemic levels; Adelaide’s was 74 per cent just ahead of Brisbane (67 per cent); Sydney at 59 per cent slightly ahead of Melbourne’s 57 per cent, while Canberra’s occupancy rate rested at 52 per cent in 2022’s penultimate month.
Despite these positive signs, Mr Zorbas implored governments to provide more attention to Australia’s CBD, especially as more skilled migrants and international students arrive on our shores.
“The Property Council will continue to work with governments to unlock the full potential of our capital cities,” he concluded.
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