Newcastle CBD Office space in high demand

Vacancy rates in the Newcastle CBD have fallen significantly over the past 12 months, according to the Property Council of Australia’s latest Office Market Report.

Demand for CBD office space (net absorption) was 8,712sqm in the year to January 2012 and has grown strongly in recent years. Overall vacancy rates have crashed from 14.5 percent to 7.9 percent in just two years. The fall is due almost exclusively to positive demand.

A grade office space is now at an absolute premium in the city, with vacancy rates for this category sitting at less than 1 percent. This compares with a vacancy rate of 8.9 percent for A grade office space in the Sydney CBD.

The vacancy rate for B grade office space was more than halved over the period, falling from 11.4 percent to 5.5 percent.

C grade office space vacancy rose marginally (by 0.7 percentage points) and D grade office space vacancy fell sharply, by 8.1 percentage points, as new tenants entered the market.

The Property Council’s NSW Regional Director – Hunter, Andrew Fletcher, says the research showed that quality office space in Newcastle is in demand.

“While we expect around 18,000sqm of new space to come online from 2014 onwards, there is nothing in the pipeline for the next 2 years,” Mr Fletcher says.

“That creates a significant undersupply in the short term and will keep vacancy rates low”.

The reduced vacancy rates and increased demand confirm the findings of the recent ANZ Property Industry Confidence Survey, which found confidence in the Newcastle economy was the highest in NSW.

“The worst thing for our city’s future would be to squander the economic opportunities before us. We need leadership to streamline the planning process and remove barriers to investment like the heavy rail line and CBD development levy.”

For further comment: Andrew Fletcher, NSW Regional Director – Hunter, 0407 410 017

Headline comments: 

• Total vacancy decreased in the Newcastle market over the year to January 2012 to its lowest level in 4 years 
• This was due almost exclusively to positive demand 
• Only C grade experienced negative demand and a vacancy increase over the period 
• There is no space due to come online over the next 2 years

Vacancy analysis: 

• Total vacancy decreased from 11.5 percent to 7.9 percent in the year to January 2012 
• This is the lowest vacancy in 4 years 
• The reduction was due mainly to net absorption of 8,712sqm 
• Withdrawals over the period totalled 312sqm 
• All grades of space, with the exception of C Grade, experienced positive demand and vacancy reductions over the period 
• A & B grade have vacancy under 6 percent 
• C & D grade have vacancy above 16 percent

Future supply: 

• There is no planned space in the pipeline over the next 2 years 
• 17,952sqm of space is due to come online from 2014 onwards

Key market indicators, Newcastle (aggregate)

For full analysis and coverage, visit the dedicated website: www.officemarketreport.com.au