Office Space Supply
After reading and hearing so much about the supply crisis, we delved further into the facts and figures to see what it was really all about. There is enough to write a white paper but too much for CREview so following are just a handful of our findings.
For a fleeting moment in January 2024, the Melbourne CBD office market was bigger than the Sydney CBD by roughly 60,000 m2. Since then, Melbourne CBD has been shrinking (withdrawals), but that still isn’t helping the vacancy rate. And there’s more supply still to come.
Canberra is the first market to have doubled in size since the market statistics started in 1990. Vacancy there is on the rise, with even more supply coming through as we write.
Brisbane supply has increased over the past year, with more on the way. Does that mean their vacancy will keep climbing to 13-14%? Perth runs on its own cycle and can expect additional supply in the next 4-5 years. Sydney has lots of new supply coming online in the next 2 years. And Adelaide? Supply is coming, but not enough to worry about like the others.
The real crisis seems to be only in the supply of new buildings, not an overall office market supply crisis. It’s about the time it takes to build new supply and of course the economic rents required to pay for it. We’ve seen this before.
There’s plenty of supply out there and don’t forget the market still needs to absorb the backfill, and even the backfill’s backfill.
Absorption? That is a completely different story for another day.
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