Falling yields in Adelaide office market "doesn't make sense": BIS Shrapnel

The Adelaide CBD office vacancy rate will hit 15% next year with prices and and effective rents in decline until the end of the decade, according to research firm BIS Shrapnel.

The oversupply of office space meant Adelaide office buildings are overvalued, said BIS Shrapnel in its Adelaide Commercial Property 2014 to 2024 report.

“Prospective internal rates of return over a five-year investment horizon are less than 3%.

“Against this backdrop, the current weight of investment funds pushing down yields doesn’t make sense,” the report author Maria Lee said.

The most recent sale by German fund SachsenFonds sale of Adelaide office complex to the Lend Lease-managed Australian Prime Property Fund’s for $175 million last month, came despite the negative forecast backdrop, the Australian Financial Review reported

It also noted 100 Waymouth Street was fully leased, 108 North Terrace (75% leased) and 169 Pirie Street (60% leased) with 70 Franklin Street which was speculatively built by the Kyren Group being 75% committed.