Vacant office space running “sky high”

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By Leith van Onselen

The dichotomy between the residential and commercial property markets could not be more stark.

Whereas residential property is experiencing another bull run, with prices rising and rental vacancies remaining low (albeit a little higher than last year), commercial property vacancies are shooting-up, with vacancy rates hitting levels in excess of the depths of the Global Financial Crisis (GFC), according to a segment aired last night on ABC’s The Business.

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According to data compiled by Jones Lang LaSalle, commercial vacancy rates are pushing 10.9% nationally, and are roughly 10% in both Sydney and Melbourne, 14% in Brisbane, and a whopping 20% in the Gold Coast.

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Moreover, office vacancy rates in Australia’s major capitals are now on par with those of New York, Chicago, Boston, and Washington – areas hit hard by the GFC.

The office downturn has led to widespread discounting, cash backs offers, and other incentives (e.g. overseas holidays and new cars) being offered by landlords in order to snare a tenant.

The outlook is also not good. As the mining boom unwinds, and the economy slows, commercial vacancy rates are expected to head higher.

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But hey, as long as house prices keep rising…

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.