From the Property Council comes news that office vacancy rates are on the rise nationally, led by weakening office demand in Perth and Brisbane:
Demand for Australian office space fell dramatically in the second half of 2012 led by big slowdowns in Brisbane and Perth, according to the Property Council’s Australian Office Market Report.
The report showed that demand for Australian office space in the six months to January dropped to less than half the 20-year average and was just one third of that recorded in the first six months of 2012.
“On a more positive note, overall vacancies sit below both the historical average and the GFC peak. Only four major markets recorded vacancies of more than 10 percent,” says Property Council Chief Executive, Peter Verwer.
Australian office vacancies now stand at 8.4 percent, up from 7.8 percent in July 2012.
“The capital cities of mining states went off the boil in the second half of 2012 and vacancy rates rose in two out of three markets across the country,” says Verwer.
“These vacancy numbers reflect the impact of insipid service sector growth and a resources industry engine that has moved down a gear”.
“Sluggish economic growth and weak demand for commercial space reinforce the need for a better targeted fiscal stimulus and further interest rate cuts,” Verwer says.
“From a demand perspective, the best performing markets were Canberra and Adelaide, although new space entering these markets resulted in vacancy increases for both business districts”.
Around 400,000 square metres of office space was released during the past six months – a figure well above the historical half year average of 280,000 square metres.
2013 is expected to be another above average year of supply, with around 633,000 square metres due to be added.
In 2014 a further 244,000 square metres is expected to come on line, while a further 769,000 square metres is slated for 2015 and beyond. The bulk of these additions will be in CBD markets.
Quick Facts
Australian CBD vacancy and key indicators
Market Vacancy rate, Jan 13 (%) Vacancy rate Jul 12 (%) Supply Additions, 6 months to Jan 13 (square metres) Withdrawals, 6 months to Jan 13 (square metres) Net Absorption, 6 months to Jan 13 (square metres) Perth CBD 5.7 4.2 21,981 17,347 -18,332 Melbourne CBD 6.9 5.6 73,190 7,220 5,340 Sydney CBD 7.2 8.1 48,637 87,903 8,466 Darwin CBD* 8.0 9.1 0 4,366 -1,676 Brisbane CBD 9.1 8.0 29,786 2,715 2,406 Hobart CBD* 9.4 5.9 12,239 792 -2,013 Adelaide CBD 9.5 7.7 44,179 7,482 9,557 Canberra 11.9 9.8 87,582 6,746 23,328 Total
(all CBD markets)8.1 7.3 317,594 134,571 27,076 * Figures relate to annual changes
So with lots of office supply due to come online over the next few years, and absorbtion rates on the slide, it looks like office vacancy rates will continue to increase, placing downward pressure on rents. With an outlook like that, no wonder the Property Council is calling for “a better targeted fiscal stimulus and further interest rate cuts”. Otherwise, some of its members might need to take a significant haircut.
unconventionaleconomist@hotmail.com
Rise in Adelaide 7.7% to 9.5% over last 6 months reflects my observations in the Adelaide CBD. Office for lease signs are going up everywhere.
BB you beat me to it
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That was going to be my contribution to MB discussion today! anyways i will add to that
http://www.adelaidenow.com.au/realestate/investing/city-vacancies-soar/story-fndbnn4m-1226575938060
If MSM is reporting this, then i presume the situation is LOT WORSE than reported!
Yes – the report is pretty spot on.
Perth definitely has more for lease signs in the CBD than last year. Not close to where it was in 2004 though but supply is coming on strong – so more vacant signs are probably imminent.
Who works in an office in Perth? Off to the mines!
Property crash in Australia will start with commercial property bubble burst.
Will it? It’s been 5 years and throughout that time we have seen a fairly decent correction in commercial and industrial property values and rentals, but not the absolute crash you keep predicting.
So if not now when – another 5 years, another 10 years, maybe 30 years.
not even BS Shrapnel is so optimistic about commercial properties as you are
what you call “fairly decent correction” is actually real price fall.
Commercial properties are 20% down from peak in 2008, rents barely reached 2008 levels, vacancy rates are still high … it will not take long before everybody finds out that commercial property is only way to lose money.
Look what happened in the rest of world. Irish commercial is down 60% and still falling, UK 50% down, US 35%, even German is 20% down with no prospect of recovery in real terms any time soon.
BTW. your commercial property bullhawk friends at BS Shrapnel have proven records of being wrong so… They said prices in Brisbane will go up by 16% in 3 years from Oct 2011. Year and a half later – prices are flat. Now prices only need 10%pa for BS to be right.
commercial property was shot to pieces in 2008/09.
Its now in a “normal down cycle” phase instead of a “super down cycle” that is the residential market.
Good call raveswei. Real unemployment in Australia will provide a snowball effect. Note exponential growth always is followed by exponential decline. The nature of markets no matter how rigged.