Demand for office space in Australia’s Central Business District (CBD) remains surprisingly strong and disappointing, with the exception of Melbourne, which has fallen to record lows, according to a new report.
The Australian Real Estate Council (PCA) Office Market Report revealed that overall CBD vacancy rates rose from 11.1 to 11.2 percent in the six months to July.
“The Australian office market has shown remarkable resilience over the last six months, with overall vacancy rates rising slightly,” said PCA CEO. Ken Morrison said In the statement.
Vacancy rates declined in all other capitals except Sydney and Melbourne. Canberra currently has the lowest vacancy rate in the country, dropping to 7.7%.
Vacancy in Sydney is increasing, as a result of the significant amount of new office space entering the market. Morrison said demand actually increased.
Tim Morchanov, head of office leasing for commercial real estate firm Cushman & Wakefield, said demand was nearly double that of the same period in 2020.
“Despite the current setback, strong fundamentals suggest that the worst is behind us.” Morchanov said Australian Financial Review.
However, the report reveals the cruel impact of repeated blockages on the Melbourne CBD office market.
Vacancy rates were the highest since January 2020, and unlike Sydney, were driven by a plunge in demand to hit record lows beyond the recession of the 1990s.
PCA’s Victorian Secretary-General, Danny Hunter, said there was an urgent need for plans to revitalize the city to encourage people and investment to return.
“All blockades are a step back for Melbourne, especially our CBD, and there remains uncertainty about the future as more supplies come online in the next six months.” Hunter said..
The slump in demand has focused on key office spaces in the market, and hunters have sought an “aggressive strategy” to attract domestic and global headquarters in Melbourne.
She also said that sublease vacancy rates have almost doubled. The supply of new office space also fell net negative as more of it withdrew from the market than was added.
“The blockade cycle has clearly shocked business confidence, and sublease vacancies are skyrocketing as people move away from CBD and small businesses and retailers are suffering,” Hunter said.
On the other side of the country, Perth’s vacancy rate has reached its lowest level since 2015, and PCA members have reported an increase in the level of inquiries from all industries.
PCA’s Executive Director of Western Australia, Sandlabrewer, said the result was a vote of trust not only for the office market, but broader for the state economy.
“It’s time for the government to step into accelerators, put cities in top gear and maintain positive economic momentum,” Brewer said.
The report measures the level of rental space, not the worker occupancy of office space.