As demand in Sydney and Melbourne surges, space across the majority of office markets throughout Australia is filling up.
In its latest report, the Property Council of Australia said office vacancy rates fell between January and July in 17 out of 23 markets covered, causing the overall office vacancy rate across the country to fall from 10.8 per cent to 10.4 per cent.
In terms of CBDs, Sydney and Melbourne were the top performers, with net demand of more than double historic averages causing vacancies to tumble from 7.4 per cent to 6.3 per cent in the case of the former and from 9.1 per cent to 8.1 per cent in the case of the latter.
Markets were also strong in non-CBD markets, including North Ryde, North Sydney, Gold Coast and Chatswood.
But net demand continued to fall in resource related markets such as Brisbane and Perth, while that in Adelaide and Canberra remained soft.
Property Council of Australia CEO Ken Morrison said the improvement in the country’s two biggest markets provided a further encouraging sign that the transition away from a resource-dependent economy was gathering momentum.
He said, however, that conditions varied across markets, and called on policy makers to continue to invest in support infrastructure in Sydney and Melbourne and encourage re-vitalisation or re-purposing of aging building stock in other markets, particularly by creating a business and taxation environment that encourages investment.
“Capital city office markets seem to be separating into a three-speed reality, with strong demand in Sydney and Melbourne, weak demand and more supply to come in Brisbane and Perth, while Canberra and Adelaide hold their ground,” Morrison said.
Markets are also expected to be challenged over the near term as 507,324 square metres of stock comes online over the next six months across Sydney, Brisbane, Melbourne and Perth – three times that delivered over the past six months and more than one and a half times historic averages.
While Sydney and Melbourne were well placed to absorb this, the report said the additional stock would challenge markets in Brisbane and Perth.