Premium office space continues to be in hot demand in the Canberra

The Property Council of Australia’s latest Office Market Report once again shows vacancy rates have declined over the past 6 months in the Canberra market, with the commercial leasing sector remaining confident that demand for office space will continue to grow.

Over the last six months to January 2019, Canberra’s overall vacancy rate decreased to 11 per cent from 12.4 per cent– which shows a healthy decrease over the last 12 months when vacancy sat at 13.2 per cent.

Demand for office space is second behind Melbourne when compared with all other CBD’s in other Australian cities, with the hottest properties being premium office product, highlighting the private sector demand for office environments that assist in staff retention by creating attractive workplaces for staff. A Grade vacancy decreased significantly over the last 6 months from 8.5 per cent to 5.2 per cent.

“The vacancy rate in Civic did however head upwards from 10.5 per cent to 12.2 per cent due to
-11,111 sqm of negative net absorption,” ACT Executive Director, Adina Cirson said.

With over 50 per cent of ACT Office Market tenanted by the Commonwealth Government, absorption can often be a little slower in a Federal Election year. However there seems to be a continuation for the Commonwealth to seek efficiencies through their leasing strategy, leaning towards a reduction in occupational density targets, improved fit outs and seeking to attract incentives before locking in longer term leases, meaning the next 12 months will be busy.

The Department of Home Affairs occupancy of 3 Molonglo Drive (Brindabella Office Park) has triggered a state of flux across Civic and Belconnen as the agency ultimately seeks to consolidate within the Airport and Belconnen. However, there will be some use of short-term lease tails on Civic stock as churn space, while Belconnen tenancies are refurbished. This is all expected to conclude over the next 12 to 18 months.

Increased regulation and scrutiny within the lending market is resulting in reduced availability of debt, particularly in relation to secondary assets. Coupled with concerns around increasing commercial rates driven by the ACT Government’s taxation reform agenda means there are some red flags which need careful monitoring.

“We have once again seen an increase in vacancies of C Grade office stock, reminding us of the importance of strategic planning and opportunities for building owners to refurbish or undertake adaptive re-use on tired office stock.

“That said, business sentiment remains strong, and with an expect an increase in office demand over the medium to longer term – things are shaping up well in the office market here in the ACT,” Ms Cirson concluded.

Media contact:  Adina Cirson |M 0429 579 972|E acirson@propertycouncil.com.au