THE lack of new buildings in Sydney and an excess in Melbourne has led to a dramatic difference in office vacancy rates since July last year.
For Sydney the level has dropped to its lowest in four years, to 7.2 per cent from 8.1 per cent. In contrast, Melbourne has increased from 5.6 per cent to 6.9 per cent, its highest in six years.
According to the Property Council of Australia's Office Market Report, for the six months to January, prime and A-grade offices are in hot demand, but anything of lesser grade is being passed over.
Nationally, central business district vacancy increased from 7.3 per cent in July 2012 to 8.1 per cent as at January 2013, with the six-monthly net leasing of 27,000 square metres being well below the historical (2000s) average of closer to 150,000 square metres per half year.
Corporations deciding to stay put, and even relinquishing some floors, has also had an impact on available space in all capital cities.
The Victorian executive director of the Property Council, Jennifer Cunich, said Melbourne's office market remains in good shape despite rising vacancy rates in some locales.
"Our Office Market Report indicates that the north-eastern and Docklands precincts lead the way with the lowest vacancy level of all Melbourne CBD locales. National Australia Bank's recent announcement of its planned expansion and 11-year lease renewal at Docklands is strong evidence of that. However, Flagstaff continues to lag the rest of greater Melbourne with a vacancy level double the Melbourne CBD average," Ms Cunich said.
Some 190,481 square metres of new office stock will come onto the market in 2013, about 64 per cent of it pre-committed, the Property Council estimates.
Next year another 89,000 square metres will become available with 49 per cent pre-committed. In total that is about 7 per cent of the current market and likely to keep vacancy rates higher.
Matt Whitby, Knight Frank's national director of research, said December employment data finished 2012 on a positive note, with the calendar year seeing the national labour market generating an additional 148,000 jobs, well above the 50,000 generated in 2011. But with more casual or part-time employment, there is an expectation of a softer labour market over the first half of 2013.
He said potential tenants were controlling costs and were not looking for additional space.
He added that leasing demand was unlikely to improve until business investment generates more full-time jobs.
Southbank's vacancy over the period increased from 6.7 to 7.5 per cent while vacancies on St Kilda Road decreased from 10.4 to 9.3 per cent, the council said.