Australia’s Office Cycle: National Office Vacancy

03 August 2017

National
According to Rob Dickins, Savills National Head of Office Leasing, “On a national level we are starting to see an improvement in the resource dominant states of Perth and Brisbane whilst the larger Eastern seaboard states continue to see strong demand, diminishing supply and a constrained development pipeline for the next 2-3 years.

“Dominant sectors in these active markets continue to be IT & Co working sectors. The smaller markets of Adelaide and Canberra continue on a rather stable demand/supply equation.”

NSW
According to Alastair Dunlop, Savills Director of Office Leasing in Sydney “Scarcity of occupier options is starting to become a factor in certain sectors across the market. In particular the sub 200sq m suites market and larger contiguous options greater than 1,500sq m.

“This is being compounded by the Tech sector which continues to produce non-expiry driven demand and a flow of new market entrants. Moving into a period of reduced supply for the next three years occupiers may be forced to make some compromises when resolving their accommodation needs.”  

Parramatta
Parramatta remains one of Australia’s tightest office markets with vacancy levels for Grade A accommodation remaining at record low levels (near 0%) according to the latest Property Council of Australia’s ‘Office Market Report’.

According to Houssam Yakzan, Savills Senior Analyst, Research & Consultancy, Parramatta’s leasing activity is expected to remain development lead as limited vacancy strengthens demand for new stock.

“Benefiting from the decentralisation of state government departments over the past 24 months, the NSW Government continues to embark on reducing their presence in the Sydney CBD, targeting a 100,000 square metre reduction in office space by 2021.

“To date, the NSW Government has pre-committed to more than 87,000 square metres of space with over 5,800 department jobs expected to relocate out of the CBD. Pre-committing to 4 Parramatta Square being developed by Walker Corporation include the Department of Planning and Environment, the Office of Environment and Heritage, the Environment Protection Authority and the Department of Finance, Services and Innovation with the move set to occur in the first half of 2019. 

“Other commitments include, the Department of Education who committed to the DEXUS development at 105 Phillip Street in 2016, will full occupy the 25,500 square metres of A Grade office tower which is expected be delivered in early 2018.

“Reports of Walker Corporation and Parramatta Council exploring the change of use of 8 Parramatta Square known as Aspire Tower from residential to commercial. Could see the 600+ unit developer replaced with 71,000 square metres of A-grade commercial floor space. If approved, Parramatta Square will be well positioned to capture much of the remaining Government requirement for space.

VIC
According to Mark Rasmussen, Savills State Director of Office Leasing in Victoria “The Melbourne CBD is in for a wild ride with vacancies tipped to continue the downward trend, the supply pipeline is limited until 2020 & demand continues to be strong.

"Tenants can expect higher rentals, lower incentives & lack of options, particularly in late 2018 & 2019.”

QLD
According to Peter Dodd, Savills Director of Office Leasing in Queensland, “We are seeing a short term blip in vacancy. We expect this to drop substantially due to continued recentralisation, as evidenced by recent major commitments by Expedia, Allianz Global Assistance and Origin Energy.
 
Owners of B Grade assets have seen a gap in the market and as such are repositioning their buildings to offer turnkey workspaces to small and medium sized businesses.”
 
SA
According to Adam Hartley, Savills Director, Office Leasing in Adelaide, “Vacancy rates have held firm over the past six months, with net absorption pushing into positive territory.

“Recent SA Government leases and the introduction of new companies to South Australia supporting the defence industry and mining have reduced the prime grade vacancy rate, broadening the gap between prime and secondary vacancy rates”.

WA
According to Shelley Ritter, Savills Director of Office Leasing in Perth, “Vacancy rates in the Perth CBD and West Perth are declining due to positive demand and we are seeing strong leasing enquiry for prime office space.

“There is limited new supply in the pipeline but we are experiencing a two tiered office market, due to the flight to quality of tenants. Pricing is stablising and incentives will reduce before we see any face rental growth.

“Looking forward, we expect to see continued migration of tenants from suburban and West Perth markets into the CBD”.

Learn more about Savills Office Leasing.

 
 

Key Contacts

Rob Dickins

Rob Dickins

National Head
Office Leasing

Savills Sydney

+61 (0) 2 8215 8833

 

Jessica Freeman

Jessica Freeman

Director - PR NSW
Corporate Services

Savills Sydney

+61 (0) 2 8913 4826