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New data demonstrating a positive lift in the take-up of office space in Australian capital cities has also raised concerns that this is not translating into a rush of workers heading back to the country’s CBDs.
Property Council of Australia CEO Ken Morrison says despite ongoing resilience in the national office market, ‘our CBDs still need attention’.
“While demand for space is increasing, the number of actual office workers in our city centres is well below pre-pandemic levels and threatens the ecosystem of cafes, restaurants and retailers that help make our CBDs such special places,” says Property Council of Australia CEO Ken Morrison.
The latest Office Market Report released by the Property Council of Australia reveals tenant demand rose an average 0.5 per cent across the key office markets in the nation’s capitals.
However, a rush of newly completed supply pushed the aggregate vacancy rate in capital and non-capital markets from 12.1 per cent to 12.9 per cent in the six months to July this year.
The combined CBD vacancy rate increased from 11.3 per cent to 12 per cent, while non-CBD areas saw a rise from 13.9 per cent to 15.2 per cent.
The only markets to improve over the past six months were Brisbane and Adelaide with the former dropping 1.4 percentage points to 14 per cent. Adelaide edged slightly lower, by 0.3 per centage points, to 14 per cent.
Canberra remains the nation’s tightest office market despite vacancies rising from 6.3 per cent to 8.6 per cent. Sydney vacancies rose from 9.3 per cent to 10.1 per cent, Melbourne from 11.9 per cent to 12.9 per cent and Perth from 15 per cent to 15.8 per cent.
“Demand for office space was strongest in Brisbane at more than three times historic average, with Sydney, Perth and Adelaide also above average, while demand grew by 0.1 per cent in Melbourne and dropped in Canberra by 0.1 per cent,” says Morrison.
The Property Council notes that underlying figures have been affected by the supply of office space in Australia’s capitals tracking above the historical average over four of the last five reporting periods. The Office Market Report is released every six months.
This is meeting with a historically lower absorption rate of space. A net 55,670sqm of office space was taken up in the six months to July this year compared to a historical average of 145,790sqm.
“All capital city CBD markets experienced new supply increases, a combined 1.2 per cent, but supply is forecast to taper off in coming years,” Morrison says.
A total of 401,576sqm of stock is expected to come online in the second half of this year, with another 437,080sqm in 2023.
Despite taking a positive view of the latest results, Morrison warns that more work needs to be done to ensure a full recovery of the country’s CBD markets.
“The recovery in our CBDs needs to be top of mind for governments and businesses even as we deal with elevated levels of COVID-19 in the community,” he says.
A report by the Property Council last month showed that the number of Australian workers heading back to their CBD offices had stalled in June.
Adelaide had the country’s highest office occupancy level at 71 per cent, ahead of Perth (65 per cent) and Brisbane (64 per cent).
Occupancy in Perth rose from two percentage points to 65 per cent while Melbourne edged one point higher to 49 per cent. Sydney remained steady at 55 per cent, although Canberra saw occupancy levels slip from 60 per cent to 53 per cent.
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