New research has captured positive signs of growth in Adelaide’s CBD office market, presenting ample opportunity for investors looking to capitalise.
JLL Research has released its statistics on national office markets for the third quarter of 2019.
According to the research, the national CBD office market vacancy rate was 8.1 per cent in Q3, representing a reduction of 1.0 percentage point over the year.
“Adelaide is one of the office markets where sentiment has improved significantly over the past 12 months. Defence, aerospace, technology and health are all growth sectors of the Adelaide market and are having a positive impact on leasing enquiry and activity,” JLL head of research, Australia, Andrew Ballantyne said.
“Boeing and BAE Systems have recently expanded their footprint in the Adelaide CBD and net absorption totaled 7,100 sqm over 3Q19.
“Vacancy trended lower to 13.5 per cent, with the prime grade sector moving back into single-digit territory (9.9 per cent). Prime gross effective rents have started to move higher and increased by 5.5 per cent over the 12 months to September 2019.”
“The Sydney CBD office market is a microcosm of the broader economy, with expansion activity in the technology and flexible space sectors offset by some additional sublease space,” JLL head of leasing, Australia, Tim O’Connor said.
“However, we are seeing strong interest for the high-quality sublease space being marketed, and a number of the options are expected to be absorbed relatively quickly.
“Overall, Sydney CBD sublease availability is sitting at 0.9 per cent of total stock – in line with the long-term average of 1.0 per cent of total stock.”
Mr O’Connor said the Melbourne CBD recorded 6,000 sqm of net absorption over the quarter, while vacancy tightened to 3.7 per cent in 3Q19.
Further, the Melbourne CBD prime grade vacancy rate tightened to 2.1 per cent in 3Q19 – the lowest level since early 2008.
“The very low prime grade vacancy rate is a positive sign for the Melbourne CBD office market as the next wave of new developments complete in 2020 and 2021,” Mr O’Connor said.
“Some of the concerns around backfill space availability are overstated, and we are already seeing healthy levels of enquiry on these assets.”
“Melbourne CBD rents continue to move higher with prime gross effective rents increasing by 4.8 per cent over the 12 months to September 2019.”
The Brisbane CBD recorded 4,700 sqm of net absorption in 3Q19 and 23,400 sqm over the 12 months to September 2019, according to Mr Ballantyne, who noted the vacancy rate compressed to 10.9 per cent in the third quarter, representing the lowest level since the fourth quarter of 2012.
“It is important to read behind the vacancy headlines in the Brisbane CBD. We are seeing positive enquiry and activity for good quality assets, and prime grade vacancy has now compressed to 6.8 per cent,” Mr Ballantyne said.
“The improvement in the Brisbane CBD has not been at the expense of the Brisbane Near City market. The Brisbane Near City recorded 31,600 sqm of net absorption over the past six months and a reduction in vacancy to 13.6 per cent in 3Q19.
“Similar to the CBD, the Brisbane Near City prime grade vacancy rate (9.1 per cent) is significantly tighter than secondary grade (17.1 per cent).”
The research showed the Perth CBD recorded net absorption of 7,700 sqm in 3Q19 and 39,800 sqm over the 12 months to September 2019.
Meanwhile, vacancy remains elevated (19.4 per cent), but the spread between prime (14.4 per cent) and secondary (27.2 per cent) remains wide, reflecting stronger occupier demand for prime-grade assets.
“The Commonwealth of Australia has moved out of caretaker mode, with stronger leasing enquiry and activity in the Canberra office market. Net absorption was 3,800 sqm over the quarter and vacancy tightened to 10.6 per cent in 3Q19,” the research report said.
“The A Grade sector of the market is significantly tighter with A Grade vacancy compressing to 6.0 per cent over the quarter.”