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Sky High Changes to Adelaide's Office Market

Last updated 02 Feb, 2024

The latest Property Council Office Market Report reveals a notable rise in the city's office vacancy rate, driven by a surge in new high-quality office spaces.

In a collaborative effort, the SA Office Market Report Breakfast held at the new One Festival Tower on 1 February 2024, brought together insights delivered by the Adelaide Economic Development Agency (AEDA) and Colliers, providing different perspectives on the market.

Rising vacancy rates amidst new developments

Adelaide’s CBD has witnessed a climb in its vacancy rate, now at 19.3%, up from 17%. This rise is attributed to the addition of modern office accommodations in 2023, including Charter Hall’s 60 King William, Cbus Property’s 83 Pirie Street, and Walker’s Festival Tower.  

Perspective from Property Council South Australia’s Executive Director

Bruce Djite, Property Council’s South Australian Executive Director, provided insight into this trend. 

"The additional office supply Adelaide has seen over 2023 such as Charter Hall’s 60 King William, Cbus Property’s 83 Pirie and Walker’s One Festival Tower has driven our vacancy rate upward, but this stock is in high demand as tenants seek quality space. This new wave of office has great ESG credentials, helps companies attract and retain talent, facilitate productivity, and drive business growth."

Insights from AEDA

Jordon Tomopoulos, Economic Research Advisor at AEDA, highlighted the economic ripple effect of new and improved office spaces.

“The new supply of premium A-grade stock has a snowball effect on the economy, as it encourages lower grade stock improve their offering through renovations. This is currently occurring at 45 Pirie Street and 100 King William Street. The upgrading of existing stock creates more jobs which inevitably benefits local businesses.

He explained, “A growing population of office-based workers continues to rise off the back of industries such as professional, financial and technical services as well as public administration and education.

“New stock creates jobs, these jobs help small businesses, confident small businesses employ staff who need service businesses, and this snowball effect expands service firms who desire new premium office space to attract talent in this tight labour market.”

Colliers' outlook on the city's diverse market

Joanne Henderson, Colliers National Director of Research, delved into the dynamics of Adelaide's office market, pointing out there’s still demand for lower-grade assets, and it still has a place in the market.

"While A-grade and B-grade stock has seen an increase to 22%, B-grade has actually been quite stable, which I think is a positive sign in the Adelaide market."

"C-grade and D-grade is beginning to taper to 25% of stock. It’s an important part of the market and we are still seeing some vacancy and there are a lot of tenants that still need it – they don’t want to be in the best tower."

Henderson noted, "There’s so much diversity within the Adelaide CBD, it’s definitely going to allow for more long-term stability that’s expected to attract a growing share of investor demand and activity." 

    2024 SA Office Market Report highlights

    Key findings from the January 2024 Office Market Report for Adelaide:

    • Vacancy in Adelaide increased from 17 per cent to 19.3 per cent.
    • Adelaide was the only CBD market in the OMR to record positive demand.
    • A grade stock recorded the highest levels of demand (3,945 square meters).
    • Adelaide’s CBD net supply rate (2.9 per cent) is the highest in the nation.

    For a deeper dive into these findings, access the full Office Market Report.

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