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Image – Canva.
  • Lowest vacancy in the country at 7.7%
  • Vacancy decreases in all grades of office stock
  • More than 45,000 sqm expected to come online later this year

The Property Council of Australia (PCA) office market report for 2021 was launched this time last week, and the results seemed largely expected.

Office occupancy in Melbourne’s CBD plunged to just 12% – the lowest level since the end of the 112-day lockdown last year. This is down from 26% (June) and is more bad news for central retail, hospitality and other businesses that rely on the presence of office workers in the CBD.

Excluding Sydney, where office occupancy dropped to 6% due to protracted lockdowns, Melbourne’s levels have remained below the rest of the capital cities since the pandemic began.

Despite health restrictions in place since the beginning of the pandemic, the Sydney CBD office market remains resilient, according to the PCA Office Market Report.

Acting NSW Executive Director, Lauren Conceicao, said the recent figures in Sydney were encouraging, with Sydney maintaining a vacancy rate below 10%.

On the other side of the country, Perth recorded “the sharpest decline in vacancy we’ve seen for both markets [Perth CBD and West Perth] in fifteen years.”

Canberra

The nation’s capital has the nation’s lowest vacancy rate, dropping from 10.1% to 7.7%.  ACT Executive Director, Adina Cirson, said the Office Market Report for the ACT reveals strong market demand, with the highest net demand of any commercial leasing sector in the country, and lowest vacancy since 2009.

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.

Ms Cirson said the figures “[highlighted] the continued tightening and resilience of the ACT office market.”

“The Commonwealth employment base and long term tenancies in Canberra are no doubt helping drive positive demand for office space to prevail against the increasing vacancy trend seen across the country,”

Data breakdown

Low vacancy rates were present across the board. “Demand for prime office space is pushing record low vacancy rates – twice its historical average…” sais Ms Cirson.

  • A grade stock dropped from 6.4% to 3.5%,
  • B grade stock dropped from 11.2% to 8.6%,
  • C grade stock dropped from 17.4% to 16.7%, and
  • D grade stock dropped from 15.4% to 14.7%.

The Civic also recorded decreases in vacancy, down to 8.5% from 12.8%.

The drivers behind the drop in rates were attributed to a number of factors. For A grade stock, the report noted that there was 40,310 square metres of net absorption. B grade stock decreases could be attributed to 17,184 square metres of withdrawals, and similarly C grade stock had withdrawals but to the tune of 8,418 square metres.

D grade stock vacancy rate reductions were attributed to 21,102 square metres of withdrawals and 10,770 square metres of net absorption.

Future supply

The report expects to see new office space in Canberra soon, with 45,055 square metres to come online in the latter half of this year, and 77,370 square metres in 2022. 18,128 square metres is expected in 2023 onwards, and 245,900sqm of space is mooted.

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