Australian CBD Office Vacancy Rates

VACANCY RATES – July 2015

Over the past 6 months, the Australian East Coast CBD office markets experienced decreased vacancy rates, with strong declines in Sydney and Melbourne. The major exception was Perth with a 12% increase to 16.6%, the highest capital city vacancy rate in Australian. Overall, vacancy rates in the Australian CBD office markets decreased over the past six months to 10.7% in July 2015, from 11.2% in January 2015. This trend was attributed to strong positive net absorption, particularly in the Melbourne and Sydney CBD markets. Sydney has the lowest CBD vacancy rate in 5 years at 6.3%. There is the expectation of increased supply in most capital city markets over the next 12 months. This will further negatively impact vacancy rates in most capital cities.

In summary, vacancy rates in all CBD markets are expected to remain relatively high over the next 12 months, with the exception of Sydney and Melbourne. The trend will be continued subdued rental growth, a very competitive leasing market and ongoing high incentive levels. Incentives may reduce in the Melbourne and Sydney markets, due to the lower vacancy rates. Interestingly, any growth in face rents in the Melbourne and Sydney markets is forecast to be offset by the reduced incentive levels.

Peter Flynn

Director – Intercommercial Property Group