Australia’s Office Vacancies On the Up

Office vacancies are on the rise lets review some of the highlights for the major Australian cities.

Perth

Perth’s CBD office vacancy rate may go as high as 8% within the next two years as the combination of large number of projects being completed and a the collapse of the mining and resources industry create a perfect storm. Companies who are laing staff off by the thousands are also entereing the sub-leasing game to try and recover some of their fixed costs.

The current vacancy rate is still only 1.3%, which is a full 1% higher than six months earlier and the first increase in the rate since July 2004. Existing projects are either pre-committed – or on hold. You just wonder how good those pre-committments are when tenants start shutting up shop?

Brisbane

The listed property trust GPT Group is denying speculation that its $630 million tower in Eagle Street will not proceed. Although the trust doesn’t have committed tenants it still claims to be proceeding with the massive tower.  The One-One-One 54-story tower has been in consturction since last year. The enviroment for commercial tenancy has changed a lot in a few months though in Brisbane.

The CBD vacancy rate for commercial space has risen to 4.2%- up from 3% six months previously. There is a risk of  a supply glut  – with 50,000 sqm of office space being added to Brisbane’s CBD in those same six months.

GPT is still confident that they will able to complete the building on time and instead of doom and gloom they see an opportunity:

“Competing supply has been dropping like flies. demand has softened as it hs throughout Australia, but Brisbane is still the fastest-growing city in Australia”

according to Mr Cope from GPT.

Other projects in Brsibane city are on hold or in doubt:

• Empire Square project has been scrapped
• Transit Centre development won’t go ahead without pre-commitment
• Investa’s Vision project has been put on hold
• the state government has canceled the $1.7 billion Northbank prject.
• Triology ($700 million) is on hold

Adelaide

Adelaide has bucked the trend as the only major city to show a drop in CBD vacancies with the rate down to 3.4% (from 4% six months earlier). Not as much of a boom town as Brisbane and Perth – Adelaide is being seen as in a good position medium term for growth. Not only does it have substantial gold and uranium mining- both metals not much affected by the Chinese downturn, but also the strong defence industry would continue to grow regardless of the world’s economic situation.

Canberra

While most predicted an increasing demand for office space with the election of the Federal Labor government in November 2007 – it hasn’t happened. Instead Canberra now has the highest office vacancy rate in the country – 8.5%. I guess being a one industry town is always bad – even if that industry is the government. There must be a small up side for Canberra when its second biggest industry, tertiary education, starts to boom again as the easy jobs dry up.

Market Street, Sydney

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