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Fresh data released by the Property Council of Australia shows the national vacancy rate for CBD office properties has risen from 12.8 to 13.5 per cent in the past six months, although these numbers belie a continued "flight to quality office space".
The council's January 2024 edition of its Office Market Report, released twice-yearly, shows vacancy rates for prime office space of 12.9 per cent versus rates of 14.5 per cent for older office stock in the secondary market.
"The increase in office supply during 2021 and 2022, far surpassing the historical norm, and continued business moves towards high-grade offices explains the results we are seeing," says Property Council chief executive Mike Zorbas.
"There is a clear divergence between older, low-quality stock and the new premium office buildings rejuvenating our cities."
The largest jumps in vacancy rates came from Adelaide, rising from 17 to 19.3 per cent, Melbourne from 14.9 to 16.4 per cent, and Sydney from 11.5 to 12.2 per cent.
Elsewhere, marginal increases of 0.1 percentage points were seen across Brisbane (11.7 per cent), Canberra (8.3 per cent) and Darwin (14.4 per cent), while there was a slight rise in Hobart from 2.5 to 2.8 per cent; by far the lowest vacancy levels of any capital city.
In contrast to other capitals, Perth’s vacancy rate fell from 15.9 to 14.9 per cent.
"The strength of local economies is also evident in these numbers. The Perth market has enjoyed a drop in vacancy rates while Brisbane and Canberra both remained stable, despite all three cities hovering around their historical average office supply levels over the past few years," Zorbas explains.
"Sydney and Melbourne continue to reflect differences in quality levels – following robust supply additions in recent years.
"Flight to quality aside, it is crucial for governments to champion the significance of our CBDs and the ecosystems of small businesses they support."
Zorbas emphasises face-to-face interactions remain something almost all people benefit from professionally and socially, and "we are starting to see that routinely recognised as complementary to the welcome dividends of flexible working".
Supply continued to be a driving force behind the CBD vacancy level, with five of the last 10 reporting periods noting higher than historic levels of supply. Supply is also expected to be above historic supply to the end of the year.
Meanwhile, in the non-CBD markets, seven of the last 10 reporting periods recorded higher than historic levels of supply. Supply is expected to remain below historic levels of supply until the second half of 2025.
Sublease vacancy increased in the CBD market, with Melbourne, Sydney and Adelaide recording sublease vacancy above their historical averages but decreased in the Non-CBD market.
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