Office supply drives vacancy level up

Significant new supply coming to market and a softening in demand have contributed to a rise in office vacancy rates in the Adelaide CBD over the six months to January 2021.

The Property Council of Australia’s Office Market Report reveals that the CBD’s vacancy rate increased to its highest level since July 2017, increasing from 14.3 to 16.0 per cent over the six months to January 2021.

On a positive note, vacancy in the Fringe decreased from 14.4 to 11.6 per cent, the lowest level since July 2018.

Property Council Executive Director Daniel Gannon said while COVID-19 had impacted demand, this occurred at the same time as a large increase in the amount of new space coming into the market.

“In fact, new supply in the Adelaide CBD had a much bigger influence on vacancy rates than reduced tenant demand from COVID-19,” he said.

“While vacancy rates for the six months to January 2021 are now the highest in some years, there is still strong interest in commercial property as evidenced through recent record-breaking deals and a spike in interest from interstate and overseas investors.

“Adelaide’s reputation as an investment destination has never been stronger.

“As our office market continues to adapt to a ‘COVID-normal’ setting, business and government have a critical role to play in supporting the return to workplaces and help more people return to office precincts.

“Occupancy in the Adelaide CBD in November 2020 was estimated to be just under 70 per cent, despite last year’s circuit-breaking lockdown.

“A vibrant CBD drives investment, growth and productivity and will play a key role in South Australia’s economic recovery,” Mr Gannon said.

Office vacancies are calculated on whether a lease is in place for office space, not whether the tenant’s employees are occupying the space or working from home.

Australian office vacancy increased from 9.6 to 11.7 per cent over the six months to January – its highest level since January 1997.

Headline comments:

  • The Adelaide CBD office market vacancy increased over the six months to January 2021
  • This was due to supply additions and negative demand
  • All grades of space have vacancy of 13 percent or higher
  • There is significant office supply due to come online in 2022

    CBD vacancy analysis:

  • Vacancy in the Adelaide CBD increased from 14.3 to 16.0 per cent
  • This was due to supply additions and negative demand
  • Supply additions totalled 16,807sqm while net absorption was -9,271sqm
  • A-Grade vacancy increased from 10.8 to 13.0 per cent due to 14,490sqm of supply additions and -763sqm of net absorption
  • Vacancy in the B-Grade segment increased from 17.0 to 18.1 per cent due to

    -3,054sqm of net absorption and 2,317sqm of supply additions

  • Net absorption of -3,872sqm drove the C-Grade vacancy increase from 19.2 to 20.8 per cent
  • D-Grade vacancy increased from 12.7 to 13.9 per cent due to -1,582sqm of net absorption

Key market indicators, Adelaide CBD (aggregate)

Media contact:  Daniel Gannon | M 0421 374 363 | E [email protected]