'Office supply is continuing to be a driving force for levels'
The office vacancy rate in Australia declined to 14.6% over the six months to July 2024, according to a new report from the Property Council of Australia.
The July 2024 edition of the Office Market Report revealed that demand for Australian offices has tightened, with more than half of capital city central business districts (CBD) reporting a decrease in office vacancies.
"It is pleasing to see vacancy levels fall in half of Australia's CBDs," said Mike Zorbas, chief executive of Property Council of Australia, in a statement. "There is room for very cautious optimism in parts of the office market."
According to the report, vacancy levels in CBDs marginally increased from 13.5% to 13.6%, while non-CBD areas saw vacancies decrease from 19.7% to 17.2%.
"In our CBDs, office supply is continuing to be a driving force for vacancy levels as demand for office space has been positive," Zorbas said. "This demonstrates businesses still see a CBD location as the best place to do business."
Vacancies in Brisbane dropped to 9.5%, down from 11.7%, marking the first time they've fallen below 10% since January 2013, the report said.
The office vacancy rate in Sydney's CBD also fell to 11.6%, while Adelaide's decreased to 17.5%.
"We continue to see a preference for high-quality office spaces, with Sydney and Adelaide being the only capitals to record higher prime vacancy than secondary vacancy," Zorbas said.
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Struggles in Melbourne
Meanwhile, Melbourne's vacancy rate rose to 18%, up from 16.6%, according to the report.
Canberra's office vacancy rate also increased, reaching 9.5%, while Perth's climbed to 15.5%.
The report attributed these increases to new supplies of quality office space but noted that remote work might likely be a contributing factor.
"Of note, Melbourne still faces stiff challenges. 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," Zorbas said.
According to the report, the supply of office spaces in CBDs are expected to remain above the historical average until January 2026. Similarly, supply in non-CBD markets is projected to stay near or above the historical average during this period.