The latest edition of Property Council’s Office Market Report for January has revealed a notable rise in overall CBD vacancy rates across the nation; but the flight to quality office spaces continued to counterbalance this surge, maintaining lower vacancy rates for prime office spaces compared to older office stock.
Nationally, the CBD vacancy rate rose from 12.8% to 13.5%, while non-CBD areas experienced a similar increase from 17.3% to 17.9%.
Among major cities, Sydney’s CBD witnessed a rise from 11.5% to 12.2%, Adelaide saw an increase from 17% to 19.3%, and Melbourne’s vacancy rate grew from 14.9% to 16.4%.
Brisbane and Canberra’s vacancy rates remained stable, with slight increases from 11.6% to 11.7% and 8.2% to 8.3%, respectively. Hobart and Darwin also saw marginal increases, while Perth’s vacancy rate bucked the trend, falling from 15.9% to 14.9%.
Interestingly, the vacancy rate for prime office spaces nationwide remained lower than secondary assets in every capital city except Sydney and Adelaide. The Australian CBD prime vacancy rate was 12.9%, compared to 14.5% in the secondary market.
Mike Zorbas, Property Council CEO, noted that despite the rise in vacancy rates due to increased supply in 2021 and 2022, there is a clear preference for high-quality office spaces.
“There is a clear divergence between older, low-quality stock and the new premium office buildings rejuvenating our cities,” Zorbas said.
“The strength of local economies is also evident in these numbers. The Perth market has enjoyed a drop in vacancy rates while Brisbane and Canberra both remained stable, despite all three cities hovering around their historical average office supply levels over the past few years.
“Sydney and Melbourne continue to reflect differences in quality levels – following robust supply additions in recent years.
The Property Council chief stressed the importance of governments championing CBDs and the small businesses they support, acknowledging the ongoing value of face-to-face interactions alongside the benefits of flexible working.
“Flight to quality aside, it is crucial for governments to champion the significance of our CBDs and the ecosystems of small businesses they support,” Zorbas said.
“Face-to-face interactions remain something almost all people benefit from in a social and a work sense and we are starting to see that routinely recognised as complementary to the welcome dividends of flexible working.”
The report underscored that supply remained a significant factor impacting CBD vacancy levels, with higher-than-historic levels noted in the last 10 reporting periods.
Sublease vacancy increased in the CBD market, particularly in Melbourne, Sydney, and Adelaide, but decreased in the non-CBD market.
Property Council is expecting supply levels to remain above historic levels through the end of the year in CBD markets and until the second half of 2025 in non-CBD markets.
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