Vacancy rates in Australia’s capital cities have increased modestly over the last six months, driven by an uptick in new office supply. 

New Property Council of Australia figures showed that showed overall CBD vacancy increased from 12.6% to 12.8% nationally. Non-CBD areas saw an increase from 15.2% to 17.3%. 

While the Australia-wide vacancy rate increased, the supply of office space in our CBDs exceeded the historical average.  

Positive demand for office space was recorded in Brisbane, Perth, Adelaide and Canberra. In Brisbane, where the demand for office space was 1.4%, the vacancy rate declined from 12.9 to 11.6%, while Canberra saw a decrease in vacancy from 8.9 to 8.2%. 

Sydney’s vacancy rate had a slight increase from 11.3 to 11.5%, and Perth’s rose from 15.7 to 15.9%. Adelaide witnessed a rise from 16.1 to 17%, and Melbourne’s vacancy rate increased from 14.1 to 15%. 

“Overall, demand for CBD office space nationally is fairly stable, slightly dropping to negative territory after a year and a half of positive demand,” Property Council Chief Executive Mike Zorbas said. 

“Notably, the results show Premium and A Grade stock remains in high demand, reinforcing businesses’ desire to provide attractive and enjoyable workplaces for their people. 

“Thriving CBDs are an essential part of our national economic prosperity and support the viability of large-scale public transport systems and investments in public amenities. 

The projected supply of office space in CBD markets is expected to remain close to the historical average throughout 2023, with an anticipated increase above the average in the second half of 2024. Non-CBD markets are predicted to experience a higher-than-average supply in the first half of the next year, followed by a decline in the subsequent year. 

Sublease vacancy increased in the Non-CBD market but remained steady in the CBD market with only Sydney and Melbourne above the historical average. 

“Sydney and Melbourne experienced slight vacancy rate increases with over 200,000 sqm of new office space planned in the next three years. However, pre-commitment rates are lower than Brisbane, with only 42% in Sydney and 17.4% in Melbourne already secured by tenants,” Zorbas said. 

Mark Curtain, CBRE Advisory & Transaction Services Senior Managing Director, Pacific said office leasing activity across Australia continued to outperform all other commercial sectors, as corporate occupiers seek to reinvent their workplace experience and encourage employees to return to the office. 

“Undoubtedly, there is significant pressure within the office sector as historic capitalisation rates come under stress and replacement values escalate,” Curtain said. 

“While the current market circumstances are weighing on the sector in the short term, it will lead to supply constraints that will enable the markets to recover and absorb the oversupply that resulted from COVID-19. 

“Office rents continue to grow both on a face and effective basis in most markets across Australia and we are very confident that the outlook is extremely positive. Australia’s economy is a standout globally, driven by incredibly strong international migration and this will continue to drive the demand for high-quality office accommodation that increases collaboration, productivity and workplace culture. 

“While it is hard to ignore the significant vacancy rates that headline many of the markets within the US such as New York, Los Angeles and San Francisco, Asia Pacific is in a very different position, and we are confident that the Australian office sector will stabilise and rebound strongly over the next few years. Brisbane, Perth and Sydney will lead the recovery.”