Despite fears COVID-19 would cripple Australia’s office rental market, vacancy rates have remained surprisingly steadfast for the first half of 2021, according to new data from The Property Council.
However, while demand in most capital cities increased, the Melbourne CBD saw a major drop in office space rentals, with vacancy increasing from 8.4 per cent to 10.4 per cent and demand at it’s lowest level on record.
“Every lockdown is a step backwards for Melbourne and particularly our CBD and there is residual uncertainty about the future with more supply coming online over the next six months,” Property Council of Australia Victorian executive director, Danni Hunter said.
Sydney was the only other capital city to see an increase in vacancy, however this was attributed to a significant amount of new office space being created, with demand actually growing by 27,000 square metres.
Elsewhere, vacancy rates dropped in Brisbane to 13.5 per cent, Perth to 16.8 per cent, Adelaide to 15.7 per cent and Canberra to 7.7 per cent.
The report measures the levels of leased space, not whether workers were actually in the office or working from home.
Overall, in the six months to July 2021, CBD vacancy ticked up from 11.1 per cent to just 11.2 per cent, while non-CBD markets recorded a larger increase from 13.0 per cent to 13.6 per cent.
“Excluding Melbourne, demand for CBD office space grew by 85,000 sqm over the six months, a result that few would have predicted given the impacts of the pandemic,” Property Council chief executive Ken Morrison said.
Vacancy in non-CBD markets was more broadly varied, with around half increasing and half declining. The result was overall demand for office space in non-CBD markets was flat.
A total of 401,605 square metres of office space is due to be added to the CBD markets in the second half of 2021, more than one and half times the historical average of 238,915 square metres.
Despite the city showing the largest drop in demand this year, more than half or 55 per cent of that new stock will be in Melbourne, with 14 per cent in Perth, 11 per cent in both Canberra and Brisbane, and 9 percent in Sydney.
Ms Hunter called on the Victorian Government to undertake an ambitious strategy to
attract global corporate tenants to Melbourne.
“The Victorian Government has some serious heavy lifting to do in the interest of
the survival of Melbourne businesses large and small,” she said.
“The Government must establish and fund a Corporate Headquarters and Tenant Attraction Strategy targeted at attracting and securing national and global headquarters to locate in Melbourne’s CBD and Greater Melbourne.”
Mr Morrison also called for all levels of government to make CBD recovery a priority.
“It is a CBD’s commercial strength that underpins its role as premier cultural, dining, entertainment, retail and tourism precincts for the broader population. It’s a future we all have a stake in,” Mr Morrison said.