The demand for Australian workspaces appears to be on an upswing, with more than half of capital city Central Business Districts (CBDs) recording a vacancy decrease. According to the latest edition of the biannual Office Market Report, which was last released in July 2024, the overall vacancy rate across Australia fell from 14.8% to 14.6% during the first half of the year — 4.2 percentage points above the historical average.
Vacancy Levels Fall in Half of Australia’s CBDs
The report, helmed by the Property Council of Australia, showed that demand for office space increased in both CBD and non-CBD markets — the first time both demand markets showed positive growth since January 2023. While vacancy in business centres remained stable, slightly increasing from 13.5% to 13.6% nationally, suburban commercial areas saw a fall from 17.9% to 17.2%.
Vacancy rates in three major Australian cities showed positive growth. Brisbane’s vacancy went down from 11.7% to 9.5%, bringing its vacancy rate below 10% for the first time since January 2013. Sydney’s CBD office space availability rate fell from 12.2% to 11.6%, and Adelaide saw a drop from 19.3% to 17.5%. However, this was not the case for three other Australian metropolises. Melbourne’s vacancy rate increased from 16.6% to 18%, Canberra’s lifted from 8.3% to 9.5%, and Perth’s rose from 14.7% to 15.5%
New supply of office space
The vacancy increases are most likely the result of new office spaces opening up from this year. According to the report, “Most of the nation’s additional new supply planned to become available in the second half of 2024 will be in the Sydney market,” and close to 300,000 square metres of office space will open up through to 2026 — more than half of which has already been tenanted.
In addition, nearly 250,000 square metres is expected to become available in the country’s second-biggest city, Melbourne, by 2026, with 20% of that space already committed to by future tenants. The Property Council adds that office spaces in the country’s city centres are predicted to stay above the historical average until January 2026. When it comes to non-CBD markets, supply will remain near or above the historical average during the same period.
Room for very cautious optimism
The news is encouraging for office workspace providers like Compass Offices who provide a variety of options such as flexible office spaces and services offices in Sydney and Melbourne. Property Council of Australia Chief Executive Mike Zorbas says the latest figures show that “businesses still see a CBD location as the best place to do business,” which provides “room for very cautious optimism in parts of the office market”.
“In the last three years, four of the six reporting periods have recorded positive demand for office spaces in our CBDs. In Adelaide and Brisbane, demand is currently 5.9 and 2.7 times their historical averages, respectively,” said Zorbas, adding, “Some of the older, lower-grade office buildings that are in lower demand are now being withdrawn from the market to be repurposed through refurbishments or converted into residential spaces or hotels.”
