State of the Market: Adelaide
It was a busy week last week with Adelaide and Melbourne having back to back State of the CRE market panels. Adelaide was represented by Zandra McGee of CBRE and Rick Warner of JLL and the discussion focused on the Adelaide office market and the trends affecting occupiers.
In round terms, the Adelaide CBD office market has only grown by about 50% since the start of the PCA surveys in 1990. This is the least of the major capitals and a consequence of the limited number of national headquarter offices.The government is a major occupier. “Major” corporates from other capital cities have branch offices but over the last several years have been leasing less space like in the home cities.
Therefore, the market is made up of a very high proportion of smaller tenants. As a result, the market has to work harder to secure every single tenant. We think this makes the market more mature and competitive. This competitiveness breeds resilience and a better understanding of what it takes to keep or attract tenants.
This leads to the national debate around repurposing commercial real estate and how to “backfill” age old vacancy. This was the first panel to suggest the suburban office market may be the best place to start. It makes sense on a residential-conversion basis and the outcome would be more office tenants flowing back into the CBD as it continues to revitalise itself with new and fresh amenity. This could fix 2 problems at once; office vacancy and housing shortage.
The general statistics for the Adelaide CBD office market according to the PCA are:
– Stock 1,563, 565 m2 or nearly 6% of the total Australian Office market
– Vacancy is 19.3% of which only 0.9% is sublease
– Absorption: 6 month net absorption average in the 5 years to January 2020 was positive 4,511 m2
– Absorption: 6 month net absorption average in the 4 years since January 2020 has been negative 3,448 m2
It’s always refreshing to listen to the way the market approaches office space during the panel and after. If you would like to be part of it, please join us at one of the upcoming events.
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