Canberra’s prime vacancy shrinks further to 5.5%, lowest level since 2008

CANBERRA, April 26, 2022 – JLL Research has published 1Q22 statistics on the national office markets, showing that Canberra has the lowest vacancy rate since 2008.

Nationwide, the figures showed a positive net absorption of 14,200 m² in the CBD office markets in 1Q22 and 163,300 m² during the 12 months to March 2022. The vacancy rate of the national CBD office market contracted 0 .2 percentage points to 13.5% in 1Q22.

JLL Head of Office Leasing – ACT, Andrew Balzanelli said: “The Canberra office market continued to post a positive net absorption of 12,600m² in the first quarter of 2022, following a strong net absorption in 2021 totaling 35,800m² for the year. Most of the net absorption was concentrated in first-level spaces (33,000 m2 by 2021)”.

As a result of positive demand, Canberra’s prime vacancy rate fell to 5.5%, the lowest level since 2008. Prime vacancy rate decreased 0.8pp to 2.8% in the first quarter of 2022, which is the tightest prime market in all states.

mr balzanelli he said: “We saw an increase in office leasing activity in the first quarter of 2022, particularly in March. We have seen a 29% increase in tenant representation reports coming into the YTD market compared to Jan-March 2021, with a 117% increase in demand from February to March, recording 13 reports in March for 23,425 m2 of space. The public sector continued to drive leasing demand in 1Q22, with the ACT Government fully occupying a significant pre-established space.

“With the upcoming federal election taking place in a matter of weeks, we anticipate a flat quarter of leasing activity for the remainder of 2Q22 as the government has now entered interim mode and leasing decisions are on hold. However, demand from the private sector is likely to remain stable, particularly from groups that win government contracts and need to increase their headcount,” Mr. Balzanelli said.

JLL Associate Director of Office Leasing, Troy McGuinness said: “Demand and activity for businesses below 500 square meters remain strong in the first quarter of 2022. There has been an influx of inquiries for smaller ‘start-up’ accommodation from established service providers in these industries. , including groups that already have a presence in Canberra.

“Furthermore, activity in the less than 1,500-square-foot category has slowed, suggesting that many businesses are still testing work-from-home models and looking for opportunities in coworking settings as people return to the workplace. work,” McGuinness said.

There continues to be base income growth in better quality Grade A and Grade B stocks. Effective net prime rentals increased 0.6% in the quarter. Growth was driven by nominal income while incentives remained stable. Secondary effective net income increased 1.2% in 1Q22.

JLL Office Leasing Director, Aaron Green saying, “Defense, government, cybersecurity and government-related professional services are the key growth sectors at ACT. Defense and Commonwealth security tenants have shown the most aggressive growth trajectories, with significant commitments for new market offering. Renovations of 3 Constitution Avenue (9,000 m2) and 15 Constitution Avenue (7,500 m2) were completed in 1Q22 and both assets were fully occupied by the ACT Government.

“The supply pipeline is forecast to be strong for the remainder of 2022, with the creation of new venues and hubs in the focus of developers. Vacancy filling of some assets is anticipated to drive vacancy up. However, the capital city will remain Australia’s tightest CBD office market through 2022, given the remarkable resilience of the Canberra market. JLL Research projects that the core vacancy rate will remain in single digit territory for the next three years,” said Mr. Green.

JLL Research is currently tracking 161,000 m² of construction space in eight developments, including a redevelopment at 5 Constitution Avenue (12,000 m²). The earliest completion is 6 Brindabella Circuit (21,000 m2), which is expected to be completed in 2Q22. Section 63 is the largest office development in the pipeline today with 40,000 square meters of office space under construction.

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