Office vacancies climbing

Slowing white-collar employment and new developments has led to a rise in vacant office space across the country into double digits, at a time of heightened corporate activity among landlords.

By InvestSMART · 1 Aug 2013

By InvestSMART ·
1 Aug 2013

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Slowing white-collar employment and new developments has led to a rise in vacant office space across the country into double digits, at a time of heightened corporate activity among landlords.

Vacancies are forecast to rise further in the next 12 months.

The rise comes as potential buyers circle the Commonwealth Bank's listed office trust, Commonwealth Office Property Fund. If successful, buyers, such as DEXUS, with 14.9 per cent of the fund, could look to sell office towers.

According to the Property Council of Australia's Office Market Report for the six months to June 30, the national vacancy rate was 10.1 per cent, with Sydney at 8.9 per cent and Melbourne at 9.8 per cent.

The vacancy rates are at the highest mark for at least a decade.

The Property Council's NSW executive director, Glenn Byres, said the vacancy rate for the Sydney CBD rose from 7.2 to 8.9 per cent in the six months to July, with all building grades posting increases.

CBRE forecasts set vacancies to peak in most CBD markets in 2015-16, with Brisbane to have the peak vacancy of about 14 per cent.

CBRE's head of research for Australia, Stephen McNabb, said the latest Property Council statistics highlighted that demand had softened across all CBD markets.

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Frequently Asked Questions about this Article…

What are the current office vacancy rates in Australia and major cities?

According to the Property Council of Australia’s office market report for the six months to June 30, the national office vacancy rate was 10.1%. Sydney recorded 8.9% and Melbourne 9.8% — the highest vacancy levels for at least a decade.

Why are vacant office spaces rising across Australia?

The article cites slowing white-collar employment and a wave of new office developments as the main drivers of rising vacant office space, with vacancy rates expected to increase further over the next 12 months.

How has the Sydney CBD vacancy rate changed recently?

Property Council NSW executive director Glenn Byres said the Sydney CBD vacancy rate rose from 7.2% to 8.9% in the six months to July, with all building grades showing increases.

What do CBRE’s forecasts say about future CBD vacancy peaks?

CBRE forecasts that vacancy rates will peak in most CBD markets in 2015–16, and expects Brisbane to reach the highest peak at about 14%.

Which listed office trust is attracting buyer interest and why does it matter to investors?

Buyers are circling the Commonwealth Bank’s listed office trust, the Commonwealth Office Property Fund. Interest matters because potential buyers — such as DEXUS, which holds about 14.9% of the fund — could decide to sell office towers if acquisitions proceed, increasing corporate activity in the sector.

What did CBRE’s head of research say about demand in CBD markets?

Stephen McNabb, CBRE’s head of research for Australia, said the latest Property Council statistics highlighted that demand had softened across all CBD markets.

Are vacancy rates expected to continue rising, and over what time frame?

Yes. The article states vacancies are forecast to rise further in the next 12 months, with CBRE predicting peak vacancy timing in many CBDs around 2015–16.

What should everyday investors watch in the office property market right now?

Investors should monitor national and CBD vacancy rates (reported by the Property Council), CBRE’s vacancy forecasts, landlord corporate activity (including potential sales around trusts like the Commonwealth Office Property Fund), and trends in white-collar employment and new office supply — all factors cited in the article as influencing vacant office space.