Property Council reports small increase in Adelaide office vacancy
Adelaide’s office market is weathering the COVID-19 storm, but with several major developments in the pipeline and enquiries limited to small operators, challenges lie ahead.
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Adelaide’s CBD office vacancy rate has held steady amid the COVID-19 crisis ahead of a series of new major developments in the city.
More than 11,500sq m of new office space entered the CBD market in the six months to July, lifting the vacancy rate slightly from 14 per cent to 14.2 per cent.
The Property Council figures are based on whether a lease is in place for office space rather than whether a tenant’s employees are occupying the space.
Property Council SA executive director Daniel Gannon said any upward pressure on vacancy rates caused by the COVID-19 crisis was likely to be felt from next year.
“Market analysts will closely follow tenant demand and sublease vacancy over the next six months as the economic effects of the pandemic continues to play into office markets,” he said.
“Occupancy rates in the CBD are strong and increasing, businesses are building momentum and investors are still looking for reliable places to park capital.”
More than 14,000sq m of new office space will enter the market later this year following completion of Kyren Group’s $70m project at 108 Wakefield Street.
It will be followed by Cbus Property’s $300m development at the former Planet Nightclub site on Pirie Street and Charter Hall’s planned 15-storey office tower on King William Street, which are expected to deliver backfill space into the market from 2022.
However, CBRE office leasing director Andrew Bahr expects the Adelaide office market to be more resilient than other cities in the wake of COVID-19
“While many of the eastern seaboard markets have seen a spike in the level of sub-lease space available, Adelaide is yet to see any real sub-lease market of note to emerge,” he said.
“This was also evident during the GFC, when Adelaide had the same level of immunity when it came to large corporates handing back space.
“Given large corporates don’t occupy huge spaces in the Adelaide market, any reduction in staff numbers is likely to see vacant desks absorbed rather than put to the open market as sub-lease space.”
Knight Frank SA head of leasing Martin Potter said about 70 per cent of occupiers had returned to their CBD offices following the initial stay at home phase, while enquiries were slowly picking up.
“Although enquiry during lockdown was subdued, momentum has returned albeit predominantly at the smaller end of the market.”
The national CBD office vacancy rate increased from 8 per cent to 9.2 per cent.