Canberra remains Australia’s most resilient office market
- Data shows rental conditions have improved for the fifth straight quarter
- The less than 500 m² cohort received the highest activity levels
- Q2 2022 demand levels are 94% higher than Q1 2022
The nation’s capital continues to see improved rental conditions after a fifth straight quarter of positive net uptake, according to recent data from JLL Research.
The data also revealed that the cohort under 500 square meters has the highest activity levels.
The results are perhaps not a surprise given the large civil service workforce in Canberra, which was not as badly affected during the early stages of the pandemic compared to other capitals. The study also comes as a recent Property Council report noted the rebound in the Australian office market.
In the 2021/22 financial year, Canberra recorded a positive net uptake of 25,3000 square metres. It also remains the tightest office market in the CBD with a vacancy rate of 6.1% in Q2 2022, one of the lowest in the world compared to other global cities.
“Canberra’s office demand has remained stable and remains the most resilient CBD office market in the country, largely due to its high proportion of public sector tenants, corporate outsourcing opportunities and consultants and the secure revenue base they provide,” said Andrew Balzanelli, Office Leasing Manager – ACT.
“The rental market is usually quiet before an election; however, we have seen particularly high levels of inquiries generated during the first and second quarters of this year, culminating in rental activity in the latter part of the third quarter through the fourth quarter. »
Andrew Balzanelli, Office Leasing Manager – ACT
For Canberra CBD tenants who entered the market in Q1, they are looking for approximately 21,965m² of space to occupy, which is significantly higher than in 2021. For Q2, this increases to 23,825m² of space, more than double the amount for the same period last year.
“The under 500 sq m market remains the most active within private sector activity, with occupants primarily seeking serviced space,” said Troy McGuiness, director of office leasing at JLL.
“Demand levels in Q2 2022 are 94% higher than Q1 2022, indicating that the ‘work from home’ model is still under consideration for many small businesses. Prime Owners continue to build suites of specifications in the market with the aim of taking advantage of them.
Troy McGuiness, JLL office leasing manager
Currently, there is a steady supply of new office builds in Canberra coupled with strong demand. For all the constructions in progress whose delivery is scheduled for this year, the pre-commitment rate is 71%.
“While we will continue to see vacancy rates increase in early 2023, backfill spaces will continue to grow. The pending vacancy does not stop or block activity, but rather fuels demand, and we are seeing this with the revitalized Central Village attracting significant interest,” Mr. Balzanelli added.
“Headline rents have increased in prime assets; we may see upward pressure on incentives in 2023 as these fill options become available at the end of 2022.”
Aaron Green, director of office leasing for JLL, added that increased federal and territorial government spending has translated into positive levels of demand since the start of the pandemic.
“Major government files continue to create development opportunities in the market. We have seen an increase in demand from legal, IT and defense service providers, driving leasing activity. »
“Growing government input into cybersecurity and military warfare will lead to increased employment and, in turn, drive demand for space for contract winners in the private sector, translating into higher levels of demand positive.”