Demand for quality office accommodation creates empty spaces in Canberra
New research from JLL has demonstrated a disparity between vacancy rates across Canberra’s primary and secondary office accommodation.
The Wrap, released on Wednesday by the global real estate firm, noted that a “two-tier market” had emerged in Canberra’s office sector.
The overall vacancy rate fell to 13.2 per cent during the first quarter of 2016.
While a prime vacancy rate of just 7.3 per cent was recorded, 21.3 per cent of Canberra’s secondary office space remained vacant.
About 32,000 square metres of obsolete stock was removed for refurbishment or residential and carpark conversions during the past 12 months.
According to JLL’s ACT head of tenant representation Gavin Martin, the federal government’s Project Tetris – an initiative aimed at reducing the amount of vacant taxpayer-funded public service office space – has spurred activity in the sector.
“Stronger leasing activity, driven by a combination of Project Tetris, natural lease expiries and robust incentives, particularly at the quality end of the market, resulted in positive 13,700 square metres of total net absorption in the first quarter of 2016,” Mr Martin said.
“Rents are up slightly and we project that incentives have reached their cyclical peak and are expected to trend lower over the medium term.”
Mr Martin said strong demand for higher quality offices had led to fewer options for commercial tenants in Canberra’s CBD.
“While the market is improving, the choice for tenants seeking larger space continues to be limited due to historic lack of new development in the CBD, other than purpose built for specific occupiers,” Mr Martin said.
He said the majority of new projects planned in Canberra during the next four years were dependent on sufficient levels of pre-commitment, with eight projects planned, totalling 211,000 square metres.
The report noted that there were still options for smaller tenants, but these were becoming increasingly limited to lower quality spaces.
“Smaller tenants should be aware that, as demand grows, it is more difficult to secure quality space,” Mr Martin said.
Canberra’s overall vacancy rate of 13.2 per cent was just above the national CBD average of 11.9 per cent.
Perth’s vacancy rate of 24.6 per cent was the highest in the country.
Sydney and Melbourne recorded the lowest vacancy rates at 7.1 per cent and 8 per cent respectively.