Office markets in Sydney and Melbourne have tightened, albeit with markets in other capital cities having eased and vacancies in Brisbane and Perth being at record highs and 10-year highs respectively, new data reveals.
Unveiling the most recent version of its semi-annual National Office Market Report, the Property Council of Australia said overall vacancies throughout the nation had risen from 10.4 per cent in January to 10.7 per cent in July.
Mining states were the worst hit, as faltering demand saw vacancy rates in Brisbane hit record levels of 14.7 per cent and those in Perth (11.8 per cent) rising to 10-year highs as net absorption in the latter city plummeted by negative 36,688 square metres.
Both cities are being impacted by particularly high vacancy rates in secondary stock, while in Brisbane, there are fears demand may not be sufficiently strong to absorb future anticipated space as premium office developments continue to appear on the city’s skyline.
Weak demand also impacted Adelaide, Canberra and a number of other non-CBD markets.
Sydney and Melbourne bucked the trend, as strong absorption caused vacancies to fall in both markets notwithstanding significant additions of stock in the latter.
Buoyed by an improving economy, demand strengthened in all grades of space except for D grade and was especially strong in premium grades, where net absorption was more than twice its level in the previous six months.
Outside the CBD, space withdrawals saw North Shore markets (11 per cent) tighten, although markets in North Ryde and Parramatta eased – albeit with virtually no A grade vacancies in the latter.
In Melbourne, meanwhile, vacancies fell across most grades, with extremely strong demand across the Civic market causing vacancies to plummet 3.6 points to 6.8 per cent there, and North Eastern and Docklands markets remaining extremely tight (2.7 per cent and four per cent respectively).
The Melbourne property sector recently received a significant boost through approval of a massive makeover of the Fisherman’s Bend precinct.
Property Council of Australia chief executive officer Ken Morrison welcomed the tightening in markets on the eastern seaboard, citing this as further evidence of the transition of the economy.
“The transition from the mining investment boom has seen vacancy rates increase in the resource states, but the rising demand in our two largest cities is a good sign that the non-mining sector is picking up,” he said. “This is precisely the sort of indicator that the RBA and federal policy makers have been looking for.”
- National office vacancy rates rose from 10.4 per cent in January to 10.7 per cent in July.
- Resource cities struggled as demand faltered, but Sydney and Melbourne bucked the trend and experienced positive demand.
- Supply additions will challenge resource cities going forward.