The number of full office floors (Premium and A Grade) vacant across Australia’s key capital city office markets has fallen over the last 12 months in line with the slight improvement in the overall total vacancy figures according to Savills Australia’s latest Full Floor Availability research.
The number of full office floors (Premium and A Grade) vacant across Australia’s key capital city office markets has fallen over the last 12 months in line with the slight improvement in the overall total vacancy figures according to Savills Australia’s latest Full Floor Availability research.
However the overall figures masked a mixed bag of results with Sydney and Melbourne predictably showing the biggest falls and Brisbane with a total office vacancy of 16.9 percent – its worst result in more than 25 years – paradoxically reporting an 11 percent fall in the number of full floors available, while Perth and Adelaide followed the script with rises.
According to Savills National Head of Research Tony Crabb, the figures further confirm the recovery in Sydney and Melbourne’s office markets whilst underlining the negative impact the end of the mining investment boom continues to have on the Perth market.
He said the Brisbane result was at first glance an anomaly however evidence of an uptick in leasing activity suggested the figures could be a bellwether for a more positive Brisbane market.
State Director Office Leasing in Brisbane, John McDonald, said office demand had bounced back over the last 12 months with 117,437 square metres of leasing activity (> 500 square metres) in the Brisbane CBD, up 27 percent on the 12 months prior.
"There’s no doubt that the CBD market has turned the corner and the full floor figures reflect that with 32,000 square metres of prime space being filled this year alone.
"Enquiry has also been stronger, especially in recent months, a trend which augurs well for an even more positive market over the next 12 months," Mr McDonald said.
He said competitive rents and incentive packages attracting fringe and suburban tenants to the CBD and State Government leases had been key drivers with childcare, health, and education and incubator businesses prominent.
Sydney Trending Well
Mr Crabb said the 14 percent decrease from 302 to 260 full floors available in Sydney had been expected given the much stronger demand over the last 18 months. He said in the last 12 months, 38 full floors had either been filled, partially occupied or committed to, however it was unlikely the market would see a dramatic fall given backfill space and new developments would add to the numbers.
"While the downward trend is very positive, we expect the number of available floors to remain at cyclical highs over the coming months as new developments, of which several are only partially committed, are added to the full floor numbers.
"Having said that, the figures are nevertheless a timely reminder for larger tenants with looming lease expiries, particularly in the Sydney and Melbourne markets.
"What the figures show for tenants is that their options are diminishing. It’s not panic stations just yet but the trend is downward and that means that tenants with lease expiries on the horizon need to do their homework to identify just what is going to be available in their preferred location," he said.
Mr Crabb said in Melbourne the general consensus was that with leasing up 17 percent on last year a recovery was well under way and that Victoria’s strong economic growth, underpinned by rapidly increasing population, would see that trend continue.
Savills Prime Full Floor Availability Report, assesses the state of the leasing market in a different manner to standard vacancy surveys. The report shows each Premium and A grade building in each city on a floor-by-floor basis highlighting which floors are available for lease, now and in the near future, in each building including those under construction and refurbishment.
The report found 831 full floors were vacant across the Adelaide, Brisbane, Melbourne, Perth and Sydney CBD office markets in August 2016, down from the 883 floors vacant in August 2015. In Adelaide 66 are vacant now versus 49 same time last year, in Brisbane now 151 vs 170, Melbourne now 174 vs 195, Perth now 180 vs 167, and Sydney now 260 vs 302.
Click here to view the Full Floor Report chart for August 2016 vs August 2015.