CBD property vacancies balloon to unprecedented highs

SQM Research has released its rental vacancy data for September, which revealed a flat vacancy rate nationally but ballooning vacancies across Melbourne and major CBD markets.

Melbourne’s rental vacancy rate has nearly doubled over the past year to 3.8% – the highest reading since December 2011.

Sydney’s rental vacancy rate, by comparison, retraced to 3.5% but remains at elevated levels:

Rental vacancies across the smaller capitals are far tighter, with Brisbane at 2.0% and the others running below 1%.

The bigger story here is the ballooning vacancy rates recorded across the major capital city markets.

Melbourne CBD’s vacancy rate has climbed to a record high 10.8%:

Brisbane CBD’s vacancy rate has climbed to 12.5%:

Whereas Sydney CBD’s vacancy rate retraced to 12.8%, but remains elevated:

Finally, asking rents are declining across Sydney and Melbourne:

Commenting on the results, SQM managing director Louis Christopher noted:

“Elevated rental vacancy rates in Sydney and Melbourne continue to push city rents downwards. This is particularly the case in the CBD and inner ring suburbs close to the CBDs. However, outside Sydney and Melbourne vacancy rates are falling again. And then when we consider regional locations Vacancy rates have fallen below 1% which really represents the point of little to no rental vacancy. In short, in September the population was still looking to stay away from the large cities. We think this trend may soon reverse, but to what extent remains a mystery.”

The bigger issue here is the projected collapse in immigration and population growth.

As reported yesterday, both Sydney and Melbourne are facing gigantic supply gluts in 2021 and 2021.

NSW is projected to have 42,000 net dwelling additions versus a 2,000 population decline in 2021 and 34,000 net dwelling additions versus 7,000 population increase in 2022:

Whereas Victoria is projected to have 51,000 net dwelling additions versus 13,000 population growth in 2021 and 48,000 net dwelling additions versus 30,000 population increase in 2022:

Sydney and Melbourne apartment rents had already fallen by around 5% over the six months to September:

Further deep rental falls are likely in Sydney and Melbourne based on this data.

Leith van Onselen
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  1. The fed broke it. Now, they own it.MEMBER

    Historically Perth loses 5% of its young each year to better opportunities East or Overseas. This year they are staying put together with the temporary relocation of FIFO workers. This accounts for the dramatic fall in vacancies over the 12 months.

  2. Which is why the elites who own these properties will have them full again as soon as absolutely possible. WFH will not be an option, you either work on site or move to SE Asia if you want to WFH, because that’s your competition and cost base.

    • They will rail against work from home but it ain’t going away. Too many shared benefits for employers and employees. How many businesses will choose to spend more than they need to on office space?

  3. Commercial office usage is becoming residential office usage. Extremely efficient in multiple ways.
    Business margins are partially saved by massive reduction in overheads, travel, headcount.

  4. Totes BeWokeMEMBER

    My wife is telling me how good it is, how much people enjoy working from home, and that’s why it won’t go back to what it was.

    Australia voted to give their futures to the elites via Labor’s faux wokeness.

    It doesn’t matter what people want, we’ll be going back to work asap…..AND….immigration will be accelerated to make up for lost profits.

    Anyone thinking otherwise hasn’t been paying much attention over the past 30 years.

    • The90kwbeastMEMBER

      I tend to agree. Senior management wants people in the office also, because that is how they work and do their roles, regardless of what that means for individual contributors who do the actual work.

      Best we’ll get is a permanent 1-2 days a week from home as a long term trend. 5 days WFH isn’t going to happen.

  5. pfh007.comMEMBER

    Those residential vacancy rates demonstrate that even with the border shut tight we need to be building a lot MORE residential housing.

    Until every capital city market has a vacancy rate of at least 4% and preferably 5% for an extended period there is a lot of building to be done.

    Which is great news for the construction industry!

  6. CBD’s are in for a world of pain
    Twitter on to it Facebook on to it. World will follow
    And as for the recovery
    What recovery?
    U.S. oil consumption recovery is getting worse, not better.
    U.S. oil consumption recovered to 65% of normal in July and has since decreased to 61%
    Energy is the economy.
    Petrol use is for driving around to see friends and make small purchases but contributes little to economic activity.
    Diesel is the barometer of the economy and its use is normally fairly insensitive to price.
    As long as there are orders, trucks, trains and ships to run!
    When diesel use is down, it is because there are few orders.
    With recovery at 17%!
    It took 4 1/2 years for oil consumption to return to the five-year average after the 2008 DFC
    The present collapse is far greater.

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