Australia’s Office Vacancies Hit Record Lows

Surging demand for prime office space and limited supply has seen the national vacancy drop to the lowest levels since 2012.

JLL's latest quarterly vacancy figures show positive net absorption of 84,300sq m over the quarter and 373,700sq m for 2018, the highest annual result since 2010.

Australia's CBD office market vacancy rate compressed in last year's forth quarter to 8.6 per cent, which sees vacancy now at the lowest level since 2012.

Despite volatility in global equity markets late last year, JLL head of research Australia Andrew Ballantyne said organisations continued to commit to long-term leases.

Sydney

Unlike its slowing residential market, Sydney's office markets are in hot demand.

Forecasting for 2019, JLL’s Tim O’Connor believes Sydney’s very low vacancy rate will see demand reflected in pre-commitment activity in new developments.

Sydney CBD recorded 68,900sq m of net absorption across 2018 and vacancy tightened to 4.1 per cent, the lowest level since the 2000 Olympics.

Sydney’s low vacancy has put upward pressure on CBD rents, while prime gross effective rents rose by 1.1 per cent over the quarter and by 7.1 per cent for the year.

Latest research by Savills expects 2019 to largely favour landlords, although tenants will experience some respite from 2020 onwards.

“However there should be some relief to tenants this year, with close to 85,000sq m of net supply set to hit the market," Savills Shrabastee Mallik, said.

Melbourne

The Melbourne CBD market was the strongest office market last year and accounted for 44.9 per cent of national CBD office market net absorption for 2018.

Melbourne CBD's vacancy fell to 3.7 per cent in the fourth quarter, O’Connor says this is the lowest level since the late 1980s.

Related: Melbourne's Office Rents Sets to Rise

Brisbane

Brisbane’s CBD recorded 7,400 sq m of net absorption last year’s fourth quarter and 27,700sq m over 2018.

“While the headline vacancy rate compressed to 13.2 per cent last year, the prime to secondary vacancy rate spread widened further,” the report said.

“Prime grade vacancy (7.2 per cent) tightened to a six-year low, while secondary grade remained elevated at 19.7 per cent.”

The suburban metro markets also benefited from solid demand in the office sector, with the Brisbane Near City, Melbourne suburban, Parramatta and South Sydney all recording net absorption above historical averages in 2018.

Related: Brisbane Developer Snaps Up Newstead Tower for Commercial Scheme