Advertisement

Vacancy: one in eight offices empty

Jul 22, 2013

Office vacancy rates in Adelaide’s CBD have topped 12 per cent, forcing landlords to offer longer rent-free periods or refurbishments to attract tenants.

Adelaide’s 12.7 per cent vacancy level is well above the national rate, which itself is rising to new highs, latest statistics released by Jones Lang LaSalle Research show.

Five of the nation’s six capital city CBD office markets recorded double-digit vacancy rates, the figures show.

Adelaide and Canberra (11.6 per cent) recorded higher vacancies over the quarter, while Sydney (10.2 per cent) and Melbourne (10.0 per cent) moved above 10 per cent for the first time in the current cycle. Perth (7.9 per cent) is the only CBD office market now recording vacancy below 10 per cent, while Brisbane continues to suffer from some building issues to be at 14.3 per cent.

“There’s no denying it’s a challenging market for landlords in particular,” Adelaide’s Jones Lang LaSalle spokesman Tom Budarick told InDaily.

“There’s not so much a downward pressure on rents; landlords are having to provide incentives such as a rent-free period or a co-contribution towards fit-out costs.

“The good news is that the vacancy rate is not so much a case of a fall in demand, rather it’s largely driven by new supply coming onto the market.

“That new supply draws tenants from older accommodation and leaves a gap there.”

Budarick said landlords were paying more attention to how their property was presented and some of the financial terms in order to get tenants into the vacant space.

“The weakest sector of the market is the lower grades of building, where they are technologically out of date, don’t have the sustainability options that many clients demand or aren’t flexible in how the space can be used.

“There is a real sweet spot, however, for A-grade, good-quality modern spaces that aren’t brand new or top-of-the-range, but they represent good value at the moment.”

The Jones Lang LaSalle research shows that nationally, office space vacancies reflect lower levels of business confidence.

“Recent surveys of business confidence and job advertisements remain a bit below-trend, highlighting that the demand environment will remain challenging over the remainder of 2013 and potentially for the first part of 2014,” the company’s national spokesman, Andrew Ballantyne, said.

“The medium-term demand prognosis, however, is firmer. The Reserve Bank of Australia has adopted an accommodative monetary policy setting, supporting interest-rate-sensitive sectors of the economy and assisting the transition from mining to non-mining sectors of the economy.

“A higher vacancy rate will precipitate a flight to quality and further widen the rental spreads and yield profile between prime and secondary grade assets. As a result, a number of withdrawals for refurbishment or conversion will occur and net supply additions are projected to be around 200,000sqm, or 1.2 per cent of total stock.”.

 

Local News Matters
Advertisement
Copyright © 2024 InDaily.
All rights reserved.