Office Space Market Shows Signs of Improvement as Vacancy Levels Decline

Vacancy rates varied significantly between cities. Brisbane recorded a significant decrease in vacancy, dropping from 11.7% to 9.5%, marking the first time its vacancy rate has been under 10% since 2013. Sydney's CBD office vacancy rate also fell from 12.2% to 11.6%, while Adelaide saw a reduction from 19.3% to 17.5%.

In contrast, Melbourne's vacancy rate rose from 16.6% to 18%, affected by the shift towards working from home and empty office blocks in the Docklands area. Canberra and Perth also saw increases, with vacancy rates rising to 9.5% and 15.5%, respectively, as new office spaces came online.

Mike Zorbas, CEO of the Property Council of Australia, expressed cautious optimism about the market. "It's encouraging to see vacancy levels fall in half of Australia’s CBDs," he said. However, he also highlighted the significant split in the market between high-quality, prime office spaces and older, secondary grade buildings, which continue to struggle.New office supply is expected to remain above the historical average until 2026, with Sydney and Melbourne set to see substantial new developments. Sydney will accommodate nearly 300,000 square meters of new office space by 2026, with Melbourne following closely with nearly 250,000 square meters.

Despite challenges such as rising construction costs and economic uncertainties, experts believe the office market is on a path to recovery. Tim Courtnall, CBRE’s head of investor leasing for the Pacific, noted strong leasing activity in Perth and Melbourne, driven by sectors such as professional services, mining, and government. "Effective rental growth across nearly all prime grade assets is a positive sign," he said.

The office space market is expected to continue evolving, with a focus on high-quality, well-located properties. While challenges remain, particularly for older and less desirable buildings, the overall outlook for the office market is cautiously optimistic.