Commercial Property
Issue No. 26 - December/January 2005/06
Adelaide office romance to be put under pressure
The occupancy and vacancy rate of commercial property is highly indicative of the state of the property market — which is why property valuation is a specialist field using sophisticated valuation methods and strong market awareness.
The current findings indicate that Adelaide office space is in high demand due to low interest rates, employment growth and strong economic performance.
Low interest rates also change the tenant dynamic with more office space being owner occupied.
The Adelaide core market, including the Riverside Centre and the area bounded by North and West Terraces, Grote / Wakefield and Pulteney Streets, currently has the third lowest Capital City CBD vacancy rate in Australia, at 7.5%.
Only Canberra and Brisbane have lower vacancy rates.
The Adelaide Core vacancy rate represents its lowest on record with positive net absorption in the six months to July 2005 of around 14,200 sqm.
Over the past 10 years the six month net absorption rate has averaged only 3,700 sqm.
The A grade market is performing extremely well with vacancies dropping from 6.2% to 3.2% over the six months to July 2005.
This market also shows the greatest net absorption of around 9,500 sqm in the same period.
These unusually low vacancy rates will be under pressure as around 60,000 sqm of new stock enters the CBD market in the next few months and up to 80,000 sqm expected within the next 18 months.
Whilst the market will be at risk of oversupply, forecasts suggest that leasing in premium markets will increase but decrease in secondary markets.
Perhaps unsurprisingly, the lowest vacancy rates are shown in Premium and A Grade buildings, indicating that occupiers are prepared to pay rents, or mortgages, commensurate with prestige and location.
Considerable rent growth has been exhibited over the six months to July 2005 and forecasts reveal that this top end of the market will strengthen over the next ...
