Office vacancy rates in Brisbane, Perth, Darwin and Adelaide are languishing, but in Sydney and Melbourne are strong, reflecting the 'patchiness of Australia's economic trajectory', states the Property Council's latest Australian Office Market Report.
Though office supply is coming on-stream in large amounts, supply is also being withdrawn from the market, and amid strong demand, vacancy rates are holding steady around the country, according to the Property Council's latest Australian Office Market Report.
The national CBD office vacancy rate was virtually steady for the six months to January 2017, edging from 11.0 per cent down to 10.9 per cent. However, the national rate masks significant divergence in performance between the states.
Demand for office space grew more than three-and-a-half times the historical average in Melbourne during the six-month period, and over five times the historical average in Brisbane. Sydney, Canberra and Perth recording small declines in demand, while other capital cities remaining flat.
Sydney's vacancy rate was 6.2 per cent, making it the lowest in the country, despite a slight increase from the previous period, which is of concern, said the Property Council is a statement.
Melbourne's vacancy rate fell from 7.0 per cent to 6.4 per cent for the period, reflecting strong employment growth. Future supply remains a concern for the city with only 40,246sqm of new stock due to enter the market this year and 51,400sqm forecast in 2018.
The Brisbane vacancy rate fell from 16.9 per cent to 15.3 per cent during the six-month period, reflecting positive demand.
The Adelaide vacancy rate hit an 18-year high, due to increases in supply and decreases in demand.
The fall in the Canberra vacancy rate is largely the result of the withdrawal of stock.
Darwin and Perth had the highgest vacancy rates in the country. The Perth vacancy rate rose from 21.8 per cent to 22.5 per cent. The lack of new office supply in the pipeline will help to stabilise the CBD market during 2017, said the Property Council.
In Darwin, weak demand growth resulted in a deterioration in Darwin’s vacancy rate from 20.7 per cent to 22.5 per cent.
Hobart’s vacancy rate has held steady at 8.2 per cent over the past year.
The office market is facing a decrease in supply nation-wide, says Ken Morrison, Chief Executive of the Property Council of Australia, which is likely to drive vacancy rates lower.
“Australia’s divergent office markets are about to be hit with a super-cycle of low supply”, he said.
“Australian CBD markets are due to have only 462,000 sqm of space is due to come online over the next three years. This is just half the amount of new supply CBD markets have experienced over the last 18 months," he said.
“For cities like Sydney and Melbourne it is likely to mean pressures on rents, and in cities like Darwin and Perth which have extraordinarily high vacancy rates, it will mean a welcome reprieve for property owners," said Morrison.
The office market has experienced a period of rapid change, said Morrison.
"In the last six months, we have seen 505,866 sqm added to the market which is almost 60 per cent above the historic average. As well, we have seen 373,335 sqm withdrawn over the period which is more than double the historical average (152,421 sqm)," he said.
The increase in office space is not expected to continue throughout 2017 and 2018, said Morrison.
"We expect the amount of additional office space across Australia during 2017 and 2018 to be less than half the historic average (293,697sqm in 2017 and 268,798sqm in 2018)," he said.
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