Australian office vacancy rates reach highest levels since the 1990s

by Sam McLeod
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Office vacancy

Australian offices had higher vacancy rates in the first half of 2023, which have risen to levels not seen since 1996.

A biannual report released by the Property Council of Australia revealed a surge in Australian office vacancies, which rose from 13.4 to 14.1 percent in the six months leading to July 2023.

Vacancy in CBDs and non-CBDs

Australian CBDs saw a moderate increase, with office vacancies climbing from 12.6 to 12.8 percent. Vacancy rates in non-CBD areas were more steep, rising from 15.2 to 17.3 percent.

These increases were driven by a surplus of new office spaces, with a one percent increase of office supply in  Australian CBDs and 1.3 percent in non-CBD areas.

Mixed demand for office space

The report also recorded a mixed negative demand for office spaces in both Australian CBD and non-CBD areas.

There was positive demand for office spaces recorded in Brisbane, Canberra, Perth and Adelaide. But Brisbane and Canberra were the only capital cities that recorded office vacancy decreases, with Brisbane vacancy falling from 12.9 to 11.6 percent, and Canberra dropping from 8.9 to 8.2 percent. 

Significantly, Melbourne and Sydney – Australia’s two largest cities – both recorded negative demand.

Vacancy increases 

Although the seven largest vacancy increases were observed in non-CBD markets, the Australian CBD also recorded a rise in vacancy rates.

Of Australia’s capital cities, Melbourne and Adelaide were both hit with the largest vacancy rate increase of 0.9 percent, with Melbourne vacancy rising to 15 percent and Adelaide to 17 percent. A smaller increase of 0.2 percent was observed in both Sydney, which reached 11.5 percent vacancy, and Perth, which hit 15.9 percent.

Looking forward

There are calls for renewed attention to be given to addressing vacancy rates in Australian CBD office spaces.

“Thriving CBDs are an essential part of our national economic prosperity and support the viability of large-scale public transport systems and investments in public amenities,” says Property Council CEO Mike Zorbas..

“We need parliaments and public and private sector leaders to recognise and champion the superior relationships, organisational, economic and societal outcomes that come from face-to-face teamwork in cities and towns across our nation each and every week,” Zorbas says.

Projections

Current projections expect office space supplies in CBD markets to remain near the historical average for the rest of 2023, with 227,676 square metres set to be added.

But, according to Zorbas, ‘pre-commitment rates are lower [in Sydney and Melbourne] than Brisbane, with only 42 per cent in Sydney and 17.4 per cent in Melbourne already secured by tenants.’

More information about the results of the Official Market Report can be found here.

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