Thursday, September 29, 2022

Australian CBD office vacancy remains solid, except in Melbourne where it is at a 20-year high

According to a new report, demand for office space in Australia’s central business districts (CBDs) has defied expectations by staying surprisingly solid, except for Melbourne, which has fallen to its lowest level on record.

The Property Council of Australia (PCA) Office Market Report showed that total CBD vacancy increased from 11.1 to 11.2 percent in the six months to July.

“Australia’s office markets have shown remarkable resilience over the past six months, with a modest increase in overall vacancy levels,” said the PCA CEO. Ken Morrison said in a statement.

Outside Sydney and Melbourne, vacancy rates have declined in all other capital cities. Canberra currently sits on the lowest vacancy in the country, falling to 7.7 per cent.

While the numbers show an increase in vacancy for Sydney, it is the result of a significant amount of new office space entering the market. Morrison said that demand has actually increased.

Tim Molchanoff, head of office leasing at commercial real estate firm Cushman & Wakefield, said demand was almost double that of the same period in 2020.

“Despite the current setback, strong fundamentals suggest the worst is behind us,” Molchanoff told Australian Financial Review.

However, reports show that repeated lockdowns have had a brutal effect on the Melbourne CBD’s office market.

Vacancy levels are at their highest level since January 2020, and unlike Sydney, it was driven by falling demand that fell to a record low, surpassing the recession of the 1990s.

Yug Times Photos
A general view of an empty street in the central business district on February 14, 2021 in Melbourne, Australia. (Wayne Taylor/Getty Images)

PCA’s Victorian Executive Director Danny Hunter said there was an urgent need for a plan to revitalize the city to encourage people and investment to return.

“Every lockdown is a step back for Melbourne, and our CBD in particular, and with more supplies online in the next six months there is residual uncertainty about the future,” Hunter said.

The decline in demand was concentrated in the market’s prime office space, prompting Hunter to call for an “aggressive strategy” to attract national and global headquarters to locate in Melbourne.

She also noted that the sublease vacancy rate had almost doubled. The supply of new office space also fell into a net negative as more was withdrawn from the market than added.

“The cycle of lockdowns has clearly shaken business confidence and has seen a rapid increase in subleasing vacancies as people move away from CBD and small business and retail losses,” Hunter said.

On the other side of the country, Perth’s vacancy rate has hit its lowest level since 2015, and PCA members were reporting increased levels of inquiries from all industries.

PCA Western Australia executive director Sandra Brewer said the results were a vote of confidence not only for the office market but for the state’s economy more broadly.

“Now is the time for governments to put their foot on the accelerator to get the city into top-gear and maintain a positive economic momentum,” Brewer said.

The report measures the level of leased space, not the worker occupancy of the office space.

Rebecca Zhu

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This News Originally From – The Epoch Times

Nation World News Desk
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