CBD Office Supply To Drop Due To A Decline In Office Space Building

A Property Council of Australia report revealed that Australia’s Central Business Districts would experience a decline in new office space development by 50% over the next three years. The total amount of new offices that is expected to be finished and ready for occupancy between 2017 and 2020 was pegged at only 462,000 square meters. The figure represented only 50% of the available supply over the last 18 months.

The effects of this slowdown vary in different parts of the country. This problem is expected to make an impact in Sydney and Melbourne, which are still facing challenges on rents, as well as in Perth, which is struggling with its weaker resources sector. In an interview with The Australian, Property Council Chief Executive Ken Morrison said there would only be a few available office spaces in the country’s CBDs, which will impact their market dynamics and the broader economy.


The Property Council’s latest office market report indicated that vacancies rose in Sydney from 5.6% to 6.2% over the six months that ended in January. However, the city still ranked with the lowest vacancy rate among all capital cities in Australia. Meanwhile, it noted a strong net demand in metros like Melbourne and Brisbane. The PCA said it was more than thrice their historical average during the same period.

Melbourne And Brisbane

Melbourne, in particular, enjoyed a lot of benefits from the employment growth. It saw its office vacancy rate drop from 7% to 6.4% over the same period. The PCA said three of the five markets with the lowest rates are in Melbourne. They are East Melbourne, Southbank, and the CBD. Meanwhile, Brisbane is also experiencing some pressure that resulted from the mining slowdown. Apart from that, its office market was also affected by the public service cuts that the previous state government implemented. Despite that, it still managed to benefit from the improvement in its local economy. The government’s take up of more office space also helped in lowering its vacancy rate from 16.9% to 15.3%, although the rate is much higher than the other metros.

Canberra And Perth

Canberra also saw a reduction in its vacancy rate from 13% to 12.6% because of some withdrawal from the market. On the other hand, the west coast saw an increase in vacancy rates, particularly in Perth. It had an increase from 21.8% to 22.5%, by far the highest in all of Australia. Little supply is expected to come over the next few years as Perth continue to struggle in coping with the end of the mining construction boom.

Darwin, Adelaide, And Hobart

Darwin also had an increase in the vacancy rate from 20.7% to 22.5%. In this city as well as in Perth, lower-quality office spaces had the most problems because tenants could easily choose from the best ones because of the high vacancy rates. Adelaide’s rate rose to its highest in 18 years from 15.4% to 16.2%. The massive increase was attributed to weaker demand and the addition of new supply. Meanwhile, the vacancy rate in Hobart remained unchanged at 8.2%.