- Property Council report shows vacancy rates increased over the 6 months to January 2021
- This was due to reduced demand and more primarily: increased supply of office space
- Property Council Chief Executive says both business and government play critical role in supporting office workplaces
The Property Council of Australia Office Market Report for the 6 month period to January 2021 shows that Australian office vacancies have edged higher from 9.6% to 11.7% – the highest level its been since January 1997.
CBD vacancy increased from 9.2% to 11.1%, the highest level since January 2015. Non-CBD markets recorded a larger increase in vacancy, from 10.4% to 13.4%, the highest level since 1995.
With regards to particular cities, The Property Tribune reported earlier today that despite Sydney’s vacancy rate increasing, Jane Fitzgerald, the New South Wales Executive Director said it remains at a comfortable level below 10%.
Similar increases were seen in major CBD markets, with Melbourne’s vacancy up from 5.8% to 8.2%, Brisbane from 12.9% to 13.6%, and Perth from 18.4% to 20%.
Property Council Chief Executive Ken Morrison said while COVID-19 had reduced demand for office space, most of the increase in vacancy had related to new office buildings coming into the market.
“While it was not a surprise to see office vacancies increase in the middle of a pandemic, it is the new supply of office space that is responsible for three quarters of this impact, not reduced tenant demand.
“COVID-19 has reduced demand for office space as businesses downsize, but this had a much smaller influence on vacancy rates than the new supply coming on stream.”
For CBD markets, a total of 339,833 sqm of stock was added compared to the historical average of 237,287 sqm.
The increase in supply relative to the historical average was even greater in non-CBD markets, with a total of 204,677 sqm of stock added, more than 2.5 times the average of 74,506 sqm.
Future supply is expected to increase for 2021 in line with historical averages for CBD markets, while non-CBD markets can expect an increase in supply above the historical average.
While vacancy rates for the 6 months to January 2021 are now the highest in some years, Mr Morrison says there is still strong commercial interest in commercial property as evidenced in recent deals, particularly for premium CBD stock.
“Despite talk of a flight from the CBD in response to COVID-19, non-CBD markets also saw notable increases in vacancy indicating that widespread health restrictions across all workplaces and the economic downturn caused by the pandemic were strong prevailing influences, rather than an aversion to CBD offices.”
Mr Morrison emphasises that both business and government will have a critical role to play in supporting the return to office workplaces.
“Vibrant CBDs drive investment, growth and productivity and must be part of our national recovery planning.”