“Canberra’s office vacancy rates highlight a need to renew the city’s ageing buildings, according the Property Council of Australia.
The council’s Office Market Report July 2017, released on Thursday, shows a huge disparity in the demand for quality office space and older stock.
There was a decrease in vacancy rates for the highest quality or A-grade office space, from 9.8 to 9.4 per cent during the first half of the year.
B-grade vacancy rates were steady at 8.9 per cent, mainly due to new additions.
Vacancy rates for C and D-grade stock remained high at 15.3 and 22.9 per cent, respectively, despite slight improvements.
Property Council ACT executive director Adina Cirson said the results demonstrated “a clear preference for premium office product”.
“We need to act quickly to make it more attractive for investors to convert tired office spaces into refreshed, higher quality, more sustainable office space,” Ms Cirson said.
“This is particularly relevant in the Woden Town Centre, where we need to prioritise renewal of our oldest office buildings.”
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Canberra’s overall vacancy rate decreased from 12.6 to 11.4 per cent – the second largest decrease in the country behind Perth.
“It is also good to see that the overall decrease is due to positive demand, rather than just withdrawal of stock, with 23,431 square metres of net absorption and 15,048 square metres of withdrawals bringing vacancy rates down in the capital,” Ms Cirson said.
CBRE ACT director of office leasing Zoe Ferrari said these developments will encourage movement throughout the city.
“We anticipate a shuffle of movement in our A and B-grade markets with A-grade tenants likely to make the jump into the new stock, freeing up space in this market that has not been previously available,” Ms Ferrari said.
Demand for office space is on the rise, according to Colliers International’s latest Office Demand Index.
The index noted a 309 per cent quarterly spike in inquiry during the second quarter of 2017.
Inquiry for office space between 1000 and 3000 square metres more than doubled in the second quarter.
A total of 66 per cent of inquiry was for office space more than 3000 square metres.
Colliers International director Michael Ceacis said there were two major factors influencing the increased demand for office space, particularly in the CBD and Parliamentary Triangle.
“One is the growth of the private sector due to Commonwealth government outsourcing,” Mr Ceacis said.
“The other is tenants realising the benefits of moving into better quality space, such as staff having better access to amenities, better space efficiency and reduced operational costs.””