This article is from the Australian Property Journal archive
CBD office markets are recovering from the post-pandemic downcycle at faster pace than previously forecast, as elevated CBD vacancy rates are driven by a small number of assets.
According to the latest research from CBRE, 62% of Australian CBD office properties had occupancy rates greater than 90% as of Q2 2023.
While 15% of properties in these CBD markets had occupancy rates between 80% and 90% in the same period.
Occupancy is relatively consistent across each Australian CBD market, with Canberra reporting the highest rate at 66%, followed by Sydney at 65%, Adelaide at 64%, Brisbane at 62%, Melbourne at 61% and Perth at 54%.
As of Q2 2023, more than 52% of office properties analysed had occupancy rates above 95%.
This as the national CBD vacancy rate lifted from 12.6% to 12.8% over the six months to July, while non-CBD areas saw an increase from 15.2% to 17.3%, according to the Property Council of Australia’s Office Market Report.
CBRE is forecasting that overall vacancy rates could increase marginally over the near term but occupancy rates for well-situated and high-quality office properties will remain elevated in the same period.
“We forecast that the CBD vacancy rate will peak at 13.5% in 2024 due to the final recovery in return-to-work rates in the larger markets and the elevated levels of new supply expected to be delivered over the next year,” said Thomas Biglands, research manager at CBRE Australia.
“Following this peak, we expect that vacancy rates will recover gradually as construction slows and leasing demand accelerates.”
The research also suggests that the majority of CBD office assets across the country are in a strong leasing position, with elevated CBD vacancy rates being driven by a relatively small number of assets.
“The lockdown period forced occupiers to rethink their office requirements and necessitated a shift towards hybrid working models, a move which led to a period of slower leasing activity and rising vacancy rates,” said Mark Curtin, senior managing director of advisory and transactions at CBRE.
“Despite these shifts, office market conditions in Australia are reversing course and showing real signs of improvement. We are coming out of this period in a much stronger position than general sentiment would suggest.”
