Consistent with the trend across the Australian CBD office market, vacancy rates have increased in Adelaide over the six months to January 2023 driven by record supply amidst a flight to quality.
The Property Council of Australia’s January 2023 Office Market Report revealed that the Adelaide CBD recorded net supply of over 23,000 sqm of space – over triple the historical average and the highest in a decade.
In addition, gross supply will spike in the latter half of 2023 with Charter Hall’s 60 King William Street and Walker Corporation’s Festival Tower delivering over 90,000 sqm of high-quality office with already over 44 per cent pre-commitment.
Property Council’s Executive Director Mr Bruce Djite said that while vacancy has been expected to increase there is clear shift in tenant demand toward higher grade stock.
“We have seen record investment in Adelaide, despite the pandemic, resulting in new and ‘future proofed’ office accommodation growing our skyline,” Mr Djite said.
“What’s also interesting is that B grade office stock vacancy has decreased with landlords carrying out activities such as backfill asset refurbishments to attract tenants. By contrast in and D grade demand has retreated.
“With approximately 33 per cent of Adelaide CBD stock over 40 years old it’s encouraging to see this level of regeneration, reflecting a market voting with its feet.
“Defence, cyber, education, medical and professional services are expected to drive future demand, so it is important that economic policy decisions provide certainty that will generate private sector investment and tenancy stability downstream.
CBD vacancy rates increased across Australia by half a percentage point in the six months to January from 12.0 to 12.5 per cent, with supply being the key driving factor.
For the full details about the Office Market Report and July 2022 results, click here.
Key Findings – six months to January 2023
▪ The Adelaide CBD office market vacancy rate increased from 14.2 to 16.1 per cent – attributable to additional office supply.
▪ Supply of 30,000sqm was recorded while net absorption was -7,986sqm.
▪ A Grade vacancy rose from 10.7 to 14.8 per cent driven by 30,000sqm of supply.
▪ B Grade stock recorded positive demand – down from 18.5 to 17 per cent
▪ Vacancy in C and D grade stock increased.
▪ There is significant office supply due in 2023.
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