Commercial property markets across a number of capital cities throughout Australia including Brisbane, Adelaide and Sydney appear to have tanked as demand has plummeted and more stock comes onto the market, the latest report suggests.
In its latest Office Market Report, the Property Council of Australia says average national vacancy rates across Australian CBDs shot up from 8.1 per cent in January to 10.1 per cent in July as a the volume of space occupied and committed dropped by 126,355 square metres even as a net of 232,025 square metres of stock hit the market.
The worst hit was Brisbane, where plummeting demand amid staff reductions in mining, public service and general business saw vacancy rates jump from 9.3 per cent to 12.8 per cent.
Markets elsewhere were subdued as volumes of occupied and committed space fell almost everywhere, with a jump in supply causing vacancy rates to surge in Melbourne (though occupancy held up respectably well there), demand for space in Adelaide dropping to decade-long lows amid soft conditions and Sydney also experiencing a drop in occupancy.
Property Council of Australia chief executive officer Peter Verwer says the rise in vacancies is not surprising given subdued economic fundamentals and growth rates in white collar employment having shrunk to a third of pre-GFC levels.
“Stubbornly low business and consumer confidence is impeding job growth and new investment, which translates into dwindling demand for office space,” Verwer says, reiterating calls for further easing of monetary policy. “Australia’s office markets shrank by around 170,000 square metres during the past six months – the negative demand is the lowest since July 2009.”
The report was not all negative, predicting that until a massive amount of space hits the market in 2015, supply additions over the next two years are expected to come in below historic averages, relieving some downward pressure on the market.
Key facts of the latest report as summarised by the Council are as follows:
- Overall vacancy up – Australian office market vacancy increased from 8.4 per cent to 10.1 per cent
- Demand negative – at negative 168,873 square metres, half-year net absorption was the lowest since the six months to July 2009
- Low supply ahead – supply projections to the Australian office market over the next two years are below the historical average
- Demand negative in all capitals – demand was negative in all CBD markets with Brisbane posting its weakest net absorption on record
- Some suburban markets performed well - the only markets to record vacancy decreases were in the Non-CBD markets
- Sydney no longer on top in NSW – Parramatta and North Ryde reported a lower vacancy rate than the Sydney CBD.