Demand has spiked for office space in the CBD, according to new data from the Property Council of Australia.
Adelaide recorded its third consecutive period of positive demand, sitting 5.9 times higher than the historical average. This demand has seen the CBD's office vacancy rates drop from 19.3 per cent to 17.5 per cent in the six months to July.
“Leased office space in Adelaide’s CBD is currently at record high levels,” says Greg Ratsch, General Manager of the Adelaide Economic Development Agency (AEDA).
“Vacancy rates have come down as a result of strong demand in the first half of this year and no new supply coming to market.”
29,041 square metres of office space was occupied by new tenants – the strongest net absorption of all national CBD markets – as key players choose to move from the suburbs into the CBD.
AEDA is pleased to welcome the SA Police, KBR Engineers (signing a 7-year lease), Tetra Tech and the Australia Aviation Agency, who have all made the shift into the CBD, with further expansion for the state government and the English College of Adelaide.
The CBD vacancy rate for A-grade stock currently sits at 20%, largely driven by new supply of high-quality office spaces such as Charter Hall’s 60 King William, Cbus Property’s 83 Pirie and Walker’s One Festival Tower, as discussed at the most recent SA Office Market Report Breakfast.
“While the vacancy rate is higher than pre-COVID levels, there has been significant growth in office supply, which reflect the confidence developers have to invest in the city,” says Mr Ratsch.
“We know that sustainability, workforce attraction and high-quality amenities are both key drivers for companies and organisations that are seeking office space in the CBD.
“While flexible working conditions continue, office attendance in Adelaide remains second highest in the country at approximately 88 per cent. Meanwhile, the total number of jobs has grown, with the number of people working in the city now 19 per cent higher than pre-COVID.”
Major upcoming projects, 150 Grenfell Street and 42-56 Franklin Street, look to add a cumulative 30,000 sqm of additional high-quality office space to the CBD from 2025. The 150 Grenfell Street development will see the RAA move approximately 1,300 staff from Mile End into the CBD.
“Adelaide Economic Development Agency continues to play an active role in attracting and support businesses to relocate to the city through its Welcome to Adelaide program,” says Mr Ratsch.
“We offer tailored support to businesses establishing or relocating to the city, assisting their growth and helping to integrate their staff into the local city community. Last financial year, the program supported the creation or relocation of more than 1000 city jobs across a variety of sectors.”
The outlook for future growth in the CBD is also positive; Colliers national director of research Joanne Henderson stating at a recent SA Property Council meeting that she expects the A-grade vacancy rate to decrease in the CBD, as tenants make the jump from lower-grade office stock.
Older generation buildings can still compete in the office market, however they will need to focus on quality fit-outs and building upgrades while offering competitive rates, says Ben Parkinson, JLL Managing Director and Head of Capital Markets - SA.
Retrofitting or the 'adaptive reuse' of older office buildings offers an alternative to demolishing and rebuilding, and can help reach energy and sustainability targets, lower carbon footprints and ensure greater standards of employee wellbeing.
Mr Parkinson notes Pelligra’s 89 Pirie St and Maras Group’s 74 Pirie St as great examples of towers which have executed the adaptive repurpose path well, achieving low vacancy numbers, and points to 45 Pirie Street and the Quintessential Equity-owned 100 King William and 30 Pirie Street as ones to watch as upgrades progress.
Overall business confidence is reflected in the broader state outlook, with South Australia named Australia's best performing economy in CommSec's State of the States July 2024 report, retaining the top spot for the third consecutive survey.
2024 SA Office Market Report highlights
Key findings from the July 2024 Office Market Report for Adelaide:
- Vacancy in Adelaide decreased from 19.3 per cent to 17.5 per cent.
- 29,041 square metres of office space was absorbed by new tenants - the strongest net absorption of all CBD markets.
- Demand sits at 5.9 times Adelaide's historical average.
For a deeper dive into these findings, access the full Office Market Report below.