Despite the pandemic’s lingering effects, the Property Council of Australia’s latest Office Market Report indicates the demand for office space still remains at a high.

The report indicates demand for office space has increased by an average of 0.1 percent across the country’s CBDs in the last six months. National sublease vacancy has declined, while the Council says that the country’s vacancy rate has only increased due to a number of new commercial buildings reaching completion. 

Property Council CEO, Mike Zorbas, says the figures demonstrate supply is influencing vacancy results, as opposed to demand.

“This is the third six-month period of positive demand nationally for office space in our CBDs,” he says.

“Organisations see that an office presence in our cities is an essential part of doing business. While new supply has increased total vacant space in some areas, these latest numbers are a vote of confidence in our CBDs.”

CBD vacancy has increased from 12 to 12.5 percent nationally, while non-CBD areas’ vacancy rates dropped from 15.2 to 15.1. Vacancy rates in Brisbane fell from 13.9 to 12.9 percent, Perth dropped from 15.8 to 15.6 percent, and Hobart recorded a drop from 2.7 to 2.5 percent. 

Vacancy increased by 0.3 percent in Canberra to 8.9, Sydney from 10.1 to 11.3 and 12.9 to 13.8 percent in Melbourne. Adelaide’s vacancy lifted from 14.2 to 16.1 percent driven by above average supply additions. The Property Council attributes the increases in Canberra, Sydney and Melbourne to moves toward prime stock over secondary stock.

Supply in office space is expected to rise this year, before falling below average in 2024 and 2025. Sublease vacancies have declined in CBD and non-CBD markets. A 0.7 percent decrease in Melbourne was recorded, while Darwin and Hobart have no sublease space available.

“Tenant demand outstripped supply in Brisbane, pushing the vacancy rate down from 13.9 to 12.9 percent,” says Zorbas.

“Looking forward, there is less than 100,000sqm of office space coming online in Brisbane over the next three years, of which 72 per cent has already been precommitted.”

The recent Property Council Office Occupancy survey indicates occupancy levels are on the rise. Perth offices at 80 percent occupancy compared to pre-pandemic levels, with Adelaide at 74 percent, Brisbane at 67, Sydney at 59, Melbourne at 57 and Canberra at 52 percent.

Zorbas believes an influx of migrants and international students will require further attention on CBDs from state and federal governments.

"Growing skilled migration and the return of overseas students is most welcome. The leadership role of governments and the active engagement of their teams in CBD life should remain front of mind for decision-makers in 2023,” he says.

“The Property Council will continue to work with governments to unlock the full potential of our capital cities.”

To read the Office Market Report in full, click here.

 

Image: Fender Katsalidis' 405 Bourke Street.