Property Council data released today found office vacancy in the Adelaide CBD is at 19.3 per cent, the highest rate in the country and nearly five percentage points more than the second most vacant CBD, Perth.
The organisation attributed the high rate to the “flight to quality” trend, meaning more businesses in the CBD are moving out of older office buildings and into newly built stock.
“The increase in office supply during 2021 and 2022, far surpassing the historical norm, and a continued move towards high-grade offices, clarifies the current situation,” said Property Council chief executive Mike Zorbas.
“There is a clear divergence between older, low-quality stock and the new premium office buildings bringing new life into our cities.”
The Office Market Report detailed total office stock in the Adelaide CBD was at 1,563,565 sqm, with 302,280 sqm of that vacant.
The vacancy rate was driven by 52,730 sqm of new supply entering the market in the six months to 1 January 2024, and the organisation noted an extra 33,063 sqm of office space is expected to come online in 2024.
Office stock outside of the Adelaide CBD was sitting at 217,326 sqm, of which 11.1 per cent was vacant. The Property Council expected 2700 sqm of space to enter the city fringe market in 2024.
The figures compare to a national CBD vacancy rate of 13.5 per cent – up from 12.8 per cent – with non-CBD areas increasing vacancy from 17.3 per cent to 17.9 per cent.
Colliers national director of research Joanne Henderson presented the Office Market Report this morning in Adelaide and said there weren’t many “dramatic changes” in the market over the past six months.
“Vacancy has now risen for eight consecutive periods – it is the highest vacancy rate recorded since January ’95,” she said.
“But we’re in a very different environment than what we had in the 90s; we were in a severe recession, our economic activity withdrew by 1.8 per cent, unemployment was reaching levels of 11 per cent.
“Our population of 20 to 24-year-olds then, their unemployment was at 17 per cent, quite extraordinary. Now, our employment levels are very, very healthy and our unemployment rates are very low.
“Yes, vacancy is high, but we’re in a bit of a different environment.”
Henderson said that the Adelaide CBD was “remaining in favour”.
“There’s definitely a clear pull to precincts within our CBD – I’m not going to say ‘flight to quality’ any more than I just did, but there is a pull to our precincts and a pull to that quality within our CBD markets,” she said, noting B Grade office stock was still performing well.
“B Grade has actually been quite stable, which I think is a bit of a positive sign – it’s an important part of the market.
“There’s a lot of tenants that don’t want to be in the best tower. They might still be growing, so there’s still demand for those lower-grade assets. They still have a place.”