Melbourne’s office market vacancy on the rise

Melbourne’s office market vacancy rate increased in the six months to July 2012 due to increasing supply, according to the Property Council of Australia’s Office Market Report released today.

Vacancy for the Melbourne CBD office market increased from 5.2 percent to 5.6 percent over the period, and only the D Grade segment experienced a vacancy decrease.

Supply additions were 55,868 sqm for the half year and net absorption was 34,085 sqm. A total of 5000 sqm was withdrawn over the period.

Over the 12 months to July 2012 net absorption of 49,092 sqm was posted.

A total of 87,328 sqm of new stock is due to enter the market in the second half of 2012, of which 51 percent is pre-committed. In 2013, a further 156,169 sqm will come online, with 70 percent pre-committed. This space over the next 18 months represents almost six percent of the market’s current size. A total of 84,000 sqm is due from 2014 onwards and 382,516 sqm is mooted for the market.

Victorian Executive Director of the Property Council, Jennifer Cunich, says Docklands continues to lead the way with the lowest vacancy level of all Melbourne CBD locales. However, Flagstaff and the Western Core have vacancy levels above that of the total Melbourne CBD market average.

“Our Office Market Report indicates that, despite Melbourne’s relatively low vacancy rate, the sector’s long term health remains highly dependent upon future demand levels,” says Ms Cunich.

“As a legacy of the GFC, Melbourne’s developers have become dependent upon pre-commitments to secure project funding. Consequently, attracting future tenants to Melbourne remains vital to the sector’s future.”

Vacancy in the Southbank precinct in the six months to July 2012 increased from 6.4 percent to 6.7 percent, solely due to net absorption of -1269 sqm. Only the C Grade segment experienced a vacancy decrease over the period. There is no space in the pipeline for Southbank.

Total vacancy in St Kilda Road decreased in the six months to July 2012 from 10.8 percent to 10.4 percent due to positive net absorption. There is no more space in the pipeline for the St Kilda Road market.

“The property sector has also called on the State Government to help stimulate construction activity by bringing forward community infrastructure investment and simplifying the planning system,” says Ms Cunich.

“We need to put more cranes in the sky. The State Government can achieve this by accelerating the timetable of its planned infrastructure rollout.”

“Opportunities also exist for stimulating construction activity by simplifying Victoria’s antiquated planning system. Planning delays are one of Victoria’s most significant investment impediments.”

The Property Council’s six-monthly Office Market Report has been the industry’s most respected independent office market research publication for more than 20 years.

Key market indicators, Melbourne (by locale)

Key market indicators, Melbourne CBD (aggregate)

Key market indicators, Southbank (aggregate)

Key market indicators, St Kilda Rd (aggregate)

For further comments contact:

Jennifer Cunich,
Executive Director
(03) 9650 8300 or 0411 118 099

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