Office vacancy reaches 18-year high
Supply additions and negative demand have colluded over the six months to January 2017, resulting in the highest Adelaide CBD office vacancy rate in 18 years.
The Property Council of Australia’s latest Office Market Report has revealed an increase in Adelaide CBD vacancy levels from 15.4 to 16.2 per cent (highest since July 1999), while Fringe vacancy increased from 10.9 to 11.3 per cent (highest since January 1999).
In the six months to January 2017 in the Adelaide CBD:
- Supply additions of 18,771sqm resulted in an increase to CBD vacancy rate.
- Withdrawals totalled 3,614sqm while net absorption was 1,341sqm.
- Premium Grade vacancy remained steady at 8.3 per cent.
- A Grade vacancy increased from 14.6 to 15.4 per cent due to 3,800sqm of supply additions and net absorption over the period of -943sqm.
- Vacancy in the B Grade segment increased from 14.4 to 15.6 per cent due to 12,971sqm of supply additions. Net absorption over the period was 5,832sqm and withdrawals totalled 871sqm.
- Supply additions of 2000sqm and net absorption of -1,096sqm contributed to the C Grade vacancy increase from 17.1 to 18.1 per cent.
- D Grade vacancy increased slightly to 20.2 per cent.
“This latest data means that CBD office vacancies in Adelaide are more than 16 per cent compared to a national average of 10.5 per cent,” said SA Executive Director Daniel Gannon.
“This disparity highlights a ‘chalk and cheese’ vacancy scenario across Australian jurisdictions, with Perth the only state capital city weighed down by a higher vacancy rate than Adelaide.
“Furthermore, in the Adelaide CBD, only the Premium Grade segment is in single-digit vacancy territory.”
Mr Gannon said that almost 10,000sqm of space is due to come online in 2017, while no space is in the pipeline for delivery the year after, and 24,000sqm of space is due to come online from 2019 onwards.
“Adelaide is facing some challenges, without doubt, and that means structural reform to areas like building code and population growth are urgently required to address our city’s total vacancy of 230,859sqm.
“Chasing demand is a common story for South Australia right now, and a challenge that we must continuously confront if we are to lift ourselves up from the bottom of the unemployment table.
“That’s why the property sector – accounting for 10.8% of GSP – will continue to advocate for a ‘hard hats and steel caps’ approach to our state’s economic recovery.”
Mr Gannon said that three of the four Australian markets with the country’s highest vacancies are capital cities with Darwin CBD (22.5%), Perth CBD (22.5%) and Adelaide CBD leading the charge.
“This means governments are right to adopt the Property Council’s focus on cities – they can drive innovation in the knowledge economy through urban infrastructure, which creates employment.
“High levels of office vacancy have an adverse impact on Adelaide’s street-level vibrancy, particularly in the CBD. High office vacancy rates mean a less dynamic city centre.”
For more information or to purchase the January 2017 Office Market Report, click here.
Media contact: Daniel Gannon | E [email protected]