This article is from the Australian Property Journal archive
ADELAIDE’S CBD office vacancy rate dropped for the fourth consecutive six-month period, while premium grade vacancies have hit an historic low of 2.6% as net effective rental growth returned to the city for the first time in five years.
According to the Property Council of Australia’s latest Office Market Report, the city saw vacancies fall from 14.7% to 14.2% in the six months to January 2019, while fringe vacancy was down from 12.6% to 11.0%.
There still remains 203,000 sqm of office vacancy.
A flight to quality has taken premium grade vacancy further downwards to 2.6% and A-grade vacancies firmed from 14.8% to 14.3%. Net absorption over the six-month period was 6,394 sqm in total, focused around A-grade space with 2,809 sqm taken up, but just 103 sqm in the premium market.
According to CBRE, net effective rental growth increased by around 5%.
Colliers national director, office leasing, James Young said high levels of enquiry seen in the final quarter of 2018 moving into 2019 led Colliers to believe that the vacancy will tighten further as the year unfolds.
“Given the lack of supply, the vacancy rate could fall to sub-13%,” he said. “2019 will see some major tenant commitments in Adelaide, to stay or relocate, which will define how the medium term dynamics will play out.”
Vacancies in the B-grade market eased slightly to 14.6%, while C- and D-grade came in to 14.8% and 15.1% respectively.
The 12-month period saw 16,509 sqm net absorption, weighted towards the first half of 2018. JLL’s head of office leasing – SA, Tom Budarick, said this was the first time Adelaide had recorded two consecutive years of positive net absorption since 2007 and 2008.
“In 2019, we expect occupier demand to keep trending positively. Private sector business confidence is growing, and while some downside risk associated with further public sector consolidation remains, ongoing business centralisation to the CBD and new businesses setting up in the city should act as a counterbalance,” he said.
Savills recorded more than 30,000 sqm of leasing transactions for spaces greater than 1,000 sqm.
“While there has been positive movement across the prime grade stock, vacancy rates across other segments remain in double-digit territory,” Property Council SA executive director, Daniel Gannon said.
“Adelaide’s skyline is changing faster than ever before, and the next 12 months will deliver significant additions to our city landscape. This is good news for property owners, but also good news for prospective tenants.”
Australian Property Journal
