The Australian office market is showing signs of recovery as vacancy rates tighten across the country, according to the latest data from the Property Council of Australia.
The July 2024 Office Market Report reveals that the overall office vacancy rate in Australia has decreased from 14.8 per cent to 14.6 per cent over the six months to July 2024.
More than half of the capital city’s central business districts (CBDs) recorded a decrease in vacancy rates, indicating a positive trend in the office market.
While CBD vacancy rates remained relatively stable, increasing marginally from 13.5 per cent to 13.6 per cent nationally, non-CBD areas saw a more significant drop from 17.9 per cent to 17.2 per cent.
Notable improvements were observed in several major cities:
- Brisbane’s vacancy rate fell from 11.7 per cent to 9.5 per cent, dropping below 10 per cent for the first time since January 2013.
- Sydney’s CBD office vacancy rate decreased from 12.2 per cent to 11.6 per cent.
- Adelaide experienced a substantial reduction from 19.3 per cent to 17.5 per cent.
However, not all cities followed the downward trend:
- Melbourne’s vacancy rate rose from 16.6 per cent to 18 per cent.
- Canberra saw an increase from 8.3 per cent to 9.5 per cent.
- Perth’s rate climbed from 14.7 per cent to 15.5 per cent.
These increases were largely attributed to new supplies of quality office space entering the market.
Property Council of Australia Chief Executive Mike Zorbas expressed cautious optimism about the results.
“It is pleasing to see vacancy levels fall in half of Australia’s CBDs. There is room for very cautious optimism in parts of the office market,” Zorbas stated.
The report also highlighted a continued preference for high-quality office spaces, with Sydney and Adelaide being the only capitals to record higher prime vacancy rates than secondary vacancy rates.
This trend has led to the repurposing of older, lower-grade office buildings through refurbishments or conversions into residential spaces or hotels.
Looking ahead, the supply of office spaces in CBDs is projected to remain above the historical average until January 2026.
Sydney is expected to lead in new supply, with approximately 300,000 square metres of office space set to come online through 2026, 61.4 per cent of which is already pre-committed.
While the overall trend is positive, challenges remain, particularly in Melbourne.
Zorbas emphasised the need for government action, stating: “The Victorian Government simply has to get some of its workforce back a few days a week to support what must again be a thriving city.”
As the Australian office market continues to evolve, the latest data suggests a gradual return to pre-pandemic levels of occupancy and demand, albeit with a clear shift towards higher-quality office spaces in prime locations.