The July 2020 Office Market Report, released by the Property Council of Australia, reveals the early stages of the COVID-19 pandemic have so far delivered a modest effect on Australian CBD office vacancy rates. This reflects strong base settings for most Australian CBD markets at the outset of the pandemic.
A market-by-market wrap up is below:
Sydney CBD vacancy increased from 3.9 per cent to 5.6 per cent over the six months to July 2020. While Sydney CBD recorded its lowest level of demand in 11 years, vacancy remains below historical averages and the city now boasts the lowest vacancy rate of all the capital cities.
“Sydney’s office market has traditionally been very tight and recorded some of its lowest vacancy rates in the past couple of years, which has put us in a better position to navigate the challenges of the COVID-19 pandemic being felt right across the property industry,” Property Council of Australia’s NSW Acting Executive Director, Belinda Ngo said today.
The Melbourne CBD office vacancy rate was revealed at 5.8 per cent, up from a historically low 3.2 per cent six months ago, which is part of the country’s first net rise in vacancies in four and a half years. The increased vacancy rate in Melbourne is not a story of falling demand, but instead a confirmation of significant developments opening, where net supply additions of 177,225sqm were recorded for Melbourne CBD over the period.
“Coming off the lowest vacancy rates in the city’s history prior to the pandemic, it is likely that demand will remain strong, notwithstanding Melbourne’s temporary shift to home-based working,” said Property Council Victoria Executive Director, Cressida Wall.
Vacancy in Brisbane CBD marginally increased from 12.7 to 12.9 per cent over the six months to July 2020. Given Brisbane CBD recorded positive tenant demand of 3,724sqm through this period, the vacancy increase was primarily driven by supply additions.
“The impacts in the South East Queensland office markets broadly mirrored the national trends”, said Queensland Executive Director of the Property Council, Chris Mountford.
Canberra’s overall vacancy rate decreased from 10.3 per cent to 10.1 per cent and was the only capital city to record a vacancy decrease over the six months to July 2020.
“ACT has recorded the lowest vacancy rate since 2012 as a result of positive demand in the Canberra commercial leasing sector,” said ACT Executive Director, Adina Cirson
Adelaide CBD office market vacancy increased marginally from 14.0 to 14.2 per cent – mainly due to supply additions. The city saw 11,530sqm of new commercial office space come online over this period.
Property Council SA Executive Director Daniel Gannon remains cautiously optimistic in stating, “Adelaide has demonstrated over the past six months that it is a comparatively safe, healthy and resilient capital city, with a growing number of competitive national advantages.”
The overall vacancy rate for the six months to July 2020 for Perth CBD was 18.4 per cent, in line with a year ago, but increased from the January 2020 vacancy rate of 17.5 per cent. In the six months to July 2020, Perth CBD experienced 17,174sqm of additional supply and 12,500sqm of office space withdrawn from the market.
“Perth’s CBD market, which was thought to be on the cusp of a turnaround before the pandemic, has so far experienced relatively moderate effects. The industry will be monitoring tenant demand and sublease vacancy over the next six months as the economic impact of the pandemic plays out,” said Property Council WA Executive Director, Sandra Brewer.