Office market throughout Australia continue to defy COVID expectations with the exception of Melbourne, the latest report has found.
Releasing its latest Office Market Report, the Property Council of Australia says the overall national office vacancy rate edged up only slightly from 11.6 percent in January to 11.9 percent in July.
But the results show a chasm between other markets and Melbourne.
Outside Melbourne, demand grew by a healthy 85,000 square meters.
However, demand plummeted in Melbourne as commercial tenants handed back a net 96,635 sqm of space – the largest decline in demand on record since Property Council data began in 1990.\
Furthermore, the market in Melbourne is expected to be challenged over the next six months as more than 220,000 sqm of new space is expected to come online – a number which is account for more than half (55 percent) of all office space to come online nationally.
(It should be noted that vacancy data may not fully reflect either actual occupancy by employees or the shift toward working from home. Office vacancies are calculated on whether leases are in place for office space – not whether or not a tenant’s employees are physically attending the workspace.)
Property Council of Australia Chief Executive Officer Ken Morrison welcomed the result, saying that Australia’s office markets have held up remarkably well during the pandemic.
But he cautioned that markets still face uncertainty.
“While office markets have shown pleasing resilience, challenges remain. Lockdowns continue and the impacts of the pandemic are still working through the economy, so CBD recovery needs to be a priority for governments at all levels,” Morrison said.
“It is a CBD’s commercial strength that underpins its role as premier cultural, dining, entertainment, retail and tourism precincts for the broader population. It’s a future we all have a stake in.”
Data at a gland:
- Aggregate Australian office market vacancy increased from 11.6 per cent to 11.9 per cent.
- Net absorption (demand) was -11,742 sqm over the six months to July 2021. The historical average is 147,051 sqm. Net absorption in Melbourne CBD was -96,635sqm.
- 200,044 sqm of space was added over the six months to July 2021. The historical average is 315,487 sqm.
- A total of 145,466 sqm was withdrawn over the period, slightly less than the historical average of 160,876 sqm.
- Canberra, Sydney CBD and Perth CBD recorded the strongest increase in demand (net absorption)
- A total of 401,605 sqm of stock is due to be added to the CBD markets in the second half of 2021, more than one and half times the historical average of 238,915 sqm. Of this, 55% will be in Melbourne, 14% in Perth, 11% in both Canberra and Brisbane, and 9% in Sydney.