The commercial property market in Australia has seen significant shifts in recent years, particularly in the context of office spaces in major capital cities. This article delves into the current state of vacancy rates across various Australian cities, reflecting on the trends, challenges, and opportunities within this dynamic sector.
Sydney: A Complex Picture
Sydney’s commercial property vacancy rate stands at 11.5% as of the last quarter report1. However, this figure could be higher when considering the availability of commercial subleases. Significant companies in Sydney are adapting to hybrid working models, leading to downsizing and a shift in the office space landscape. For instance, Commonwealth Bank plans to exit its 19,000 sqm space at Darling Park Tower 1, significantly impacting the total vacancy of the building. The vacancy rise also contributes to a fall in property values, with notable sales reflecting this trend. Lease terms are becoming shorter, dropping from an average of 41 months (3.5 years) in 2019 to 29 months (2.5 years).
Melbourne: Elevated Vacancy Rates
In Melbourne, a report forecasts office vacancy rates in the CBD could rise to as much as 20%2. This increase is attributed to the industry-wide “flight to quality,” which has created a glut in the B- and C-grade markets. This shift pushes asset managers to rethink facilities and value offerings to tenants. Agile leasing agreements are becoming more prevalent, with a notable increase in businesses looking for three-year arrangements, shorter than the standard five-year minimum.
Brisbane: A Leader in Office Leasing
Brisbane is emerging as a leader in the Asia Pacific region for office leasing. It recorded a 5.9% growth in its CBD tenant base since the end of 2021, placing it second only to Seoul in the region. This growth is driven by robust economic conditions and a strong return to office work. The vacancy rate in Brisbane has tightened from 15.4% to 11.6%, and the city is expecting to reach a sub-10 % vacancy rate by the end of 20243.
Adelaide: Rising Supply and Vacancy
Adelaide is anticipating a historic supply of office space in 2023, with 92,016 square meters set to enter the market. This is the largest expected supply over one year on record. Despite a large proportion of this new supply being pre-committed, the vacancy rate is expected to rise from 16.1% to 18.4% by the end of the year4.
AirCommercial: A solution for the evolving commercial property market
In the face of Australia’s changing commercial property landscape, AirCommercial emerges as a highly relevant and effective solution. Its unique platform, specialising in short-term leases, aligns perfectly with the trend towards shorter lease terms, as seen in cities like Sydney and Melbourne. This flexibility is especially beneficial in uncertain economic times, allowing businesses to adapt to market changes without long-term commitments.
Moreover, AirCommercial’s approach to providing first right of refusal for agents and landlords, coupled with their innovative AirCommercial Finance for security bonds, offers a streamlined and secure leasing process. This attracts quality tenants seeking short-term options and provides landlords with steady income streams and reduced risk in a fluctuating market.
As the commercial property sector navigates through varied vacancy rates and tenant preferences, AirCommercial stands out as a versatile and forward-thinking partner. Its services cater to the needs of modern businesses and property owners, ensuring that even amid market shifts, commercial leasing remains a thriving and lucrative sector.