Australia’s office market has finally broken the 20 million sqm market for the first time in its history driven by record supply of new stock, according to the Property Council of Australia’s latest Office Market Report.
According to the Office Market Report, 454,168 sqm of stock was added in the six months to July 2006 – eclipsing the 415,363 sqm added in the half year to January 2006, and is the highest single-period stock addition since July 1992.
The report now tracks a total of 20,234,779 sqm of office space are tracked across 25 locales around the country.
More importantly, despite a record supply of stock coming onboard, vacancy rates in Australia’s office market dropped by 0.6% to 6.9%.
In the six months to July 2006, a total of 385,195 sqm of space was absorbed, more than twice the 15-year historical average and builds on that of the year’s first half absorption of 421,663 sqm.
According to the Property Council, in the six months to July 2006, the Melbourne CBD office market absorbed a total of 173,121 sqm of space – more than eight times the 15-year historical average; followed by Sydney CBD and Walsh Bay at 77,530 sqm; Gold Coast with 20,106 sqm, North Ryde with 19,818 sqm and Brisbane fringe with 19,626 sqm.
Property Council’s chief executive Peter Verwer said the result was an indication of continuing strong tenant demand.
“It is fair to say that demand for office space remains incredibly strong. Markets around the country continue to show their ability to digest huge amounts of supply.”
“The Canberra, Brisbane and Perth markets are all incredibly tight, and continue to challenge tenants wishing to expand or move into higher quality space,” he added.
According to the Office Market Report, Sydney’s CBD vacancy rate was the highest of any CBD market in the country at 9.4% after falling 0.3% in six months to July 2006.
Verwer said despite the economic challenges faced by New South Wales, Sydney’s CBD market has posted a vacancy decrease of 0.3% to 9.4% and it achieved this despite the addition of more than 110,000 sqm of space over the period.
The lowest vacancy rate was in recorded in Canberra at 2.1%; followed by Brisbane CBD at 2.3%; Perth CBD at 3.5%; Melbourne CBD at 7.5%; and Adelaide Core at 7.7%.
According to the Office Market Report, a total of 312,747 sqm of stock is due to be added to the Australian market in the second half of 2006, significantly larger than the 15-year average of 253,157 sqm per period.
In 2007, a further 891,070 sqm is due to come on-line around Australia, followed by 607,701 sqm in 2008+.
Verwer said the Office Market Report also shows the trend towards strengthened CBD markets has continued. Total Australian CBD office market vacancy is 6.5%, while non-CBD vacancy is 8.0%.
Verwer said demand has driven the Australian office market for the past year now, and will continue to do so over the short to medium term.
“The very strong supply additions to the market over the past two periods will continue for the next year and a half,” he added.
By Adam Parsons and Nelson Yap
National Summary
Non-CBD markets:
- Ten of Australia’s 13 non-CBD markets covered by the Office Market Report posted vacancy decreases over the period. Brisbane’s Near-city market remained static at 4.2% vacancy. The Parramatta and Chatswood markets both posted vacancy increases
- By vacancy, the top three non-CBD markets are West Perth (3.1%), Brisbane Near-city (4.2%) and Adelaide Fringe (4.5%)
- Nine of the 13 markets are under 10% vacancy. East Melbourne, Parramatta and Crows Nest / St Leonards all have vacancy over 10%, primarily the result of over-supply issues. Chatswood also has vacancy over 10%, but this is a result of weak demand
- A total of 105,433 sqm of stock was added to non-CBD markets over the period, almost double the 15-year average of 53,668 sqm
Future supply:
Total Australian office market:
- A total of 312,747 sqm of stock is due to be added in the second half of 2006. This will be significantly larger than the 15-year average of (253,157 sqm per period)
- In 2007 a further 891,070 sqm is due to come on-line around Australia, followed by 607,701 sqm in 2008+
- A total of 1,300,960 sqm of stock is mooted
CBD markets:
- A total of 219,657 sqm of stock is due to be added to CBD markets in the second half of 2006. This is only slightly above the 15-year average of 199,489 sqm
- In 2007 a further 579,691 sqm is due to come on-line, followed by 435,923 sqm in 2008+
- A total of 909,021 sqm of stock is mooted
Non-CBD markets:
- A total of 93,090 sqm of stock is due to be added to non-CBD markets in the second half of 2006. This is more than the 15-year average of 53,668 sqm
- In 2007 a further 311,379 sqm is due to come on-line, followed by 171,778 sqm in 2008+
- A total of 391,939 sqm is mooted
Key market indicators, all Australian office markets (aggregate), July 2006 | |||
Total vacancy, July 06 (%) | Total vacancy, Jan 06 (%) | Net absorption, 6 months to July 06 ( sqm) | Net absorption, 12 months to July 06 ( sqm) |
6.9 | 7.5 | 385,195 | 806,858 |
Best & worst performing markets, by net absorption (6 months to July 06) | |
Market | Net absorption ( sqm), 6 months to July 06 |
Best performing markets | |
Melbourne CBD | 173,121 |
Sydney CBD & Walsh Bay | 77,530 |
Gold Coast (Revised) | 20,106 |
North Ryde | 19,818 |
Brisbane Near-city | 19,626 |
Worst performing markets | |
Chatswood | -5058 |
Southbank (Melbourne) | -135 |
Adelaide Fringe | 2029 |
West Perth | 2263 |
Parramatta | 2652 |
Vacancy, Australian CBD markets, July 2006 | |||
Market | Vacancy rate, July 06 (%) | Vacancy rate, January 06 (%) | Vacancy rate, July 05 (%) |
Canberra Region | 2.1 | 2.1 | 2.9 |
Brisbane CBD | 2.3 | 3.5 | 3.9 |
Perth CBD | 3.5 | 5.8 | 9.5 |
Melbourne CBD | 7.5 | 8.3 | 7.8 |
Adelaide Core | 7.7 | 6.8 | 7.5 |
Sydney CBD & Walsh Bay | 9.4 | 9.7 | 10.2 |
Total (all CBD markets): | 6.5 | 7.0 | 7.6 |
Vacancy, Australian non-CBD markets, July 2006 | |||
Market | Vacancy rate, July 06 (%) | Vacancy rate, January 06 (%) | Vacancy rate, July 05 (%) |
West Perth | 3.1 | 3.7 | 5.0 |
Brisbane Near-city | 4.2 | 4.2 | 4.4 |
Adelaide Fringe | 4.5 | 5.5 | 4.7 |
Gold Coast | 6.5 | 7.6 | 5.7 |
North Sydney | 7.7 | 9.8 | 11.2 |
Adelaide Frame | 7.8 | 9.2 | 8.6 |
Southbank | 8.2 | 8.8 | 15.9 |
North Ryde | 9.0 | 9.8 | 13.7 |
St Kilda Road | 9.4 | 10.1 | 9.9 |
East Melbourne | 10.4 | 13.6 | 9.4 |
Parramatta | 10.8 | 9.2 | 9.0 |
Crows Nest/St Leonards | 11.1 | 12.6 | 15.0 |
Chatswood | 14.9 | 13.0 | 15.5 |
Total (all non-CBD markets): | 8.0 | 8.6 | Leave a comment Welcome Back! |