This article is from the Australian Property Journal archive
OFFICE vacancy rates across Australia increased from 8.3% to 9.5% over the six months to July but Sydney and Melbourne provided a strong buffer against the initial impact of the COVID-19 pandemic, according to the Property Council of Australia.
The latest PCA Office Market Report found despite the coronavirus, aggregate Australian vacancy remains below its historic average, with the key Sydney and Melbourne CBDs sitting at less than 6% vacancy.
Chief executive Ken Morrison said the record low rates of vacancy in Melbourne and Sydney have provided a strong buffer against the initial impact of COVID-19.
“The impact of COVID-19 on our CBDs and office markets in still at an early phase, but so far the pandemic has had only a modest impact on vacancy rates,” Morrison said. “Office markets started this pandemic in good shape, with incredibly low vacancies in Sydney and Melbourne, and strengthening positions in most other markets,”
“Vacancy rates have increased over the past six months, but tenant demand has so far been flat, not falling, and overall vacancies are still below the historic average.
“It’s a reminder that office markets have been resilient in the first stage of the pandemic, despite the fact that many office workers have spent months working from home,” he added.
The vacancy rate for the Sydney CBD was 5.6% (up from 3.9% in January) and the Melbourne CBD vacancy was 5.8% (up from 3.2% in January). Melbourne CBD vacancy was most significantly impacted by a 4.6% increase in additional office supply, while the Sydney CBD vacancy was most influenced by 1.2% reduction in tenant demand.
Vacancies in other capital city markets are sitting at Canberra at 10.1%, Brisbane at 12.9%, Adelaide at 14.2% and Perth at 18.4%.
During the period, net absorption was -60,227 sqm, below the historic average is 155,035 sqm. 353,255 sqm of space was added over the six months to July 2020 – above the historical average of 311,113 sqm. A total of 83,910 sqm was withdrawn over the period, just over half the historical average of 163,464 sqm.
Net absorption for the CBD office market was 691 sqm, below the historic average of 97,885 sqm. A total of 300,864 sqm of stock was added to CBD markets over the period, above the historical average of 236,245 sqm. At the same time, 60,081 sqm was withdrawn, which is below the historic average of 126,678 sqm.
The vacancy for the non-CBD market increased from 9.2% to 10.3%. Net absorption was -60,918sqm, slightly above the historical average of 57,151 sqm.
Looking ahead, a total of 390,500 sqm of stock is due to be added to CBD markets in the second half of 2020 – above the six-month historic average is 236,245 sqm. The historical average 12-month supply of space to the total CBD markets is 472,490 sqm.
In 2021, 350,086 sqm is due to be added, a further 679,315 sqm is due to come online from 2022 onwards. A total of 436,054sqm is mooted.
In non-CBD markets, a total of 240,562sqm of stock is due to be added in the second half of 2020, which is more three times the six-month historic average of 74,868 sqm. The historical average 12-month supply of space to the total Non-CBD markets is 149,736 sqm. Next year, 120,920sqm is due to be added, a further 174,085sqm of space is due to come online from 2022 onwards. A total of 452,774sqm is mooted.
Morrison said “while there is plenty of commentary about the end of the office, the data doesn’t suggest this and there is a long way to go as business works its way through the economic and social impacts of COVID-19.
“The reactivation of our CBDs and office buildings will be an important element of our economic recovery in coming months, and something that all levels of government will need to consider carefully.
“Vibrant CBDs drive investment, growth and productivity and must be part of our national recovery planning,” Morrison said.
