This article is from the Australian Property Journal archive
CANBERRA’S office market has recorded its lowest vacancy rate since 2008, reaffirming its long held position as the tightest office market in Australia.
According to JLL Research’s latest office market statistics from 1Q22, the nation’s capital has recorded its fourth consecutive quarter of positive net absorption, at 12,600sqm over the 12 months to March 2022.
This comes after Canberra recorded a 35,800sqm positive net absorption for the 2021 full year, the majority of which was in the prime grade market, at 33,000sqm.
Nationally, JLL Research revealed positive net absorption of 14,200sqm across CBD office markets in the first quarter and 163,300sqm for the year to March 2022, with the vacancy rate contracting 0.2% to 13.5% in 1Q22.
Back in Canberra, with the headline vacancy rate at 5.5%, its lowest level since 2008, the prime vacancy rate also dropped, down 0.8% to 2.8% for quarter, making it the tightest prime market nationally.
“We saw an increase in office leasing activity in Q1 2022, particularly in March. We have seen a 29% increase in Tenant Representation briefs coming to market YTD compared to January-March 2021, with a 117% increase in demand from Feb-March recording 13 briefs in March for 23,425 sqm of space,” said Andrew Balzanelli, head of office leasing at JLL, ACT.
Balzanelli noted that the public sector is still driving Canberra’s leasing demand this quarter, with the ACT government accounting for significant preleased space.
| Vacancy rate | |||||
| Market | 1Q21 | 2Q21 | 3Q21 | 4Q21 | 1Q22 |
| Sydney | 12.1% | 13.2% | 13.0% | 12.5% | 12.3% |
| Melbourne | 14.3% | 14.1% | 15.0% | 15.0% | 14.8% |
| Brisbane | 14.0% | 15.9% | 15.8% | 15.5% | 14.9% |
| Perth | 20.2% | 19.7% | 19.1% | 19.1% | 19.7% |
| Adelaide | 16.9% | 16.9% | 16.4% | 15.6% | 14.6% |
| Canberra | 7.6% | 7.0% | 6.5% | 5.7% | 5.5% |
“With the upcoming Federal election to be held in a matter of weeks, we anticipate a flat quarter of leasing activity for the remainder of 2Q22 as the government has now entered caretaker mode and leasing decisions are put on hold,” added Balzanelli.
Despite this, the private sector will not be similarly effected and will hold stable over this period.
Activity and demand in the 500sqm segment was strong across the quarter, with a surge of enquiries received for start-up sized spaces from already established service providers, while the sub-150sqm category saw a drop off over 1Q22.
“Activity in the sub 150 sqm category has tapered, suggesting that many businesses are still piloting working from home models as well as looking for opportunities in coworking environments as people return to the workplace,” said Troy McGuinness, associate director of office leasing at JLL.
Over the quarter prime net effective rents were up 0.6%, attributed to face rents and stable incentives. At the same time secondary net effective rents were up by 1.3%.
“Defence, government, cyber security, and government facing professional services are the key growth sectors in the ACT. Defence and Commonwealth security tenants have shown the most aggressive growth trajectories, with significant commitments to new market supply,” said Aaron Green, office leasing director at JLL.
With two large assets fully occupied by ACT government tenants undergoing and completing renovations over the quarter, the 9,000sqm 3 Constitution Avenue and the 7,500sqm 15 Constitution Avenue.
More broadly, JLL is tracking 161,000sqm of space under construction spanning eight developments, including the refurbishment of the 12,000sqm of 5 Constitution Avenue.
“The supply pipeline is forecast to be strong for the remainder of 2022, with the creation of new precincts and hubs the focus for developers. The backfill vacancy of some assets is anticipated to push the vacancy upward. However, the capital city will remain Australia’s tightest CBD office market over 2022, given the remarkable resilience of the Canberra market. JLL Research projects the headline vacancy rate to remain in the single digit territory over the next three years,” concluded Green.
