Australia’s CBD office markets have demonstrated remarkable resilience in the face of new challenges introduced by the COVID-19 pandemic. All but Melbourne CBD, that is. The Property Council of Australia’s Office Market Report for the six months to July 2021 reflected a positive demand for office space for the majority of capital city office markets, despite recent lockdowns.
Property Council Chief Executive Ken Morrison commented that, while this is good news for the commercial office sector, there is still a while to go.
“While office markets have shown pleasing resilience, challenges remain. Lockdowns continue and the impacts of the pandemic are still working through the economy, so CBD recovery needs to be a priority for governments at all levels.
“It is a CBD’s commercial strength that underpins its role as premier cultural, dining, entertainment, retail and tourism precincts for the broader population. It’s a future we all have a stake in,” Mr. Morrison said.
The Sydney CBD office market proved itself to be one of the most resilient Australian office markets over the last six months. The vacancy rate remains below 10%, demonstrating strength in alleviating despite the challenges faced in a pandemic, and Sydney recorded the second demand, after Canberra.
Acting NSW Executive Director of the Property Council of Australia, Lauren Conceicao, commented the office occupancy rates are a step forward showing encouraging signs.
“The CBD has been a slow-moving story, but tenant demand has increased by 0.6% from January to July 2021 and vacancy overall has increased from additional supply coming online, an increase from 8.5 percent to 9.2 percent,” Ms Conceicao said.
Melbourne’s office market has taken a substantial hit by repeated lockdowns as vacancy rates, at 10.4%, are at their highest since 2000. The vacancy increase was a result of significant negative demand. In spite of high vacancy and negative demand, 222,000 sqm of new stock is set to enter the market by the end of 2021.
Danni Hunter, VIC Executive Director of the Property Council of Australia, said: “Every lockdown is a step backwards for Melbourne and particularly our CBD and there is residual uncertainty about the future with more supply coming online over the next six months.
“These numbers and declining office occupancy reinforce the urgent need for a plan to revitalise our CBD and ensure Melbourne continues to be a place to live, work and invest,” Ms Hunter said.
Canberra’s office market has recorded its lowest vacancy in 12 years at 7.7% due to positive demand and withdrawals. The Office Market Report for July 2021 reveals Canberra to have the highest net demand of all Australian office markets.
ACT Executive Director, Adina Cirson, said “The Commonwealth employment base and long term tenancies in Canberra are no doubt helping drive positive demand for office space to prevail against the increasing vacancy trend seen across the country.
“Having employees back to the office is critical to keeping our economy going during this time,” Ms Cirson said.
Ms. Cirson pointed out the importance to the economy of getting both the private sector and the public service to back into the office in accordance with public health advice.
Brisbane CBD’s office market proved resilient as vacancy decreased marginally by 0.1% over the 6 months to July 2021. The positive sentiment in Queensland’s market may have been influenced by an increased demand for office space, as well as an increase in the property industry’s confidence, displayed in last quarter’s ANZ/Property Council’s Survey where industry confidence grew from 144 to 147 index points.
Jen Williams, Queensland Executive Director of the Property Council, said, “Securing the rights to host the 2032 Olympics means that Brisbane’s golden decade of opportunity has begun, and as a result, we can expect this interest in office space to continue. This is our city’s chance to attract new businesses, which will bring along with them new talent and new investment in our commercial assets.
“With the ongoing threat of lockdowns and impact of social restrictions, measures to support CBD revitalisation are more needed than ever,” Ms Williams commented.
The Office Market Report for July 2021 revealed Perth CBD’s vacancy sits at 16.8%, its lowest in 6 years. West Perth’s office vacancy has also displayed improvement. West Perth vacancy decreased by 3% to 19.1% over the period.
Sandra Brewer, WA Executive Director at the Property Council, said, “today’s vacancy rates are an encouraging sign for the Perth office market and the local businesses that rely on office workers to thrive,”
“Immediate support measures to encourage higher CBD visitation such as free or heavily discounted public transport and reduced pressure on parking costs, will ensure the early signs of improvement translate into strong post-COVID city activity,” Ms Brewer said.
The Adelaide CBD market experienced a decrease in vacancy to 15.7% as a result of positive demand and stock withdrawals in the six months to July 2021. Australia’s most liveable city also boasts a significant amount of space to enter the market by 2022.
Daniel Gannon, SA Executive Director of the Property Council of Australia has said, “Adelaide’s office market has bucked expectations with vacancy rates decreasing during COVID. This demonstrates the resilience of Adelaide’s office market and is a testament to South Australia’s handling of the pandemic. There was more vacant space in July 2017 and a higher vacancy rate than there is in the Adelaide CBD four years later – an extraordinary situation given the global pandemic.”
Adelaide CBD’s performance overshadows many other Australian capital city markets, demonstrating growth and resilience in an unpredictable and disturbing time of the global pandemic.
Ultimately, all of Australia’s capital city markets, with the exception of Melbourne, have demonstrated both resilience and growth in unprecedented times, as demand for office space has risen and vacancy figures have decreased over the last six months.
For more information on Property Council’s Office Market Report July 2021 (released on 5 August 2021), click here to order.
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