Canberra's lower end of office market faces oversupply: HTW

Canberra's lower end of office market faces oversupply: HTW
Canberra's lower end of office market faces oversupply: HTW

The office market in Canberra has experienced an oversupply in recent years, driven by high vacancy levels due to the Commonwealth government policy and the demand for quality high-end space, say valuation firm Herron Todd White in their July office market update. 

As a consequence, the lower end price of the market felt the impact as a flow on effect from the abundance of space which in turn led to downward pressure on rents and increases in incentives available to tenants. 

The continuation of low interest rates provided the opportunity for those looking to invest or acquire smaller unit properties for under $500,000. Primary locations include the City, Kingston, Manuka and Braddon and secondary locations are Deakin, Turner and Phillip or one of the town centres, Belconnen, Gungahlin and Tuggeranong, says HTW.

This class of property comprises small office units ranging from 50 square metres to 200 square metres in units plan complexes.

An example being Unit 1/22 Franklin Street Manuka which sold in June 2017 for $276,000 with an area of 55 square metres showing $5,018 per square metre.

Canberra's lower end of office market faces oversupply: HTW 

Manuka is an inner south primary boutique shopping centre located within five minutes of the Parliamentary Triangle with a sought after office precinct. Unit 60 and 61/18 Flinders Way Manuka sold for $150,000, each being 55 square metres and 54 square metres respectively showing $2,727 per square metre and $2,777 per square metre and a yield of 7.5%. The units were leased and included two car spaces. 

Secondary locations include Deakin, Turner and Philip, an example being Unit 2/42 Geils Street, Deakin sold in April 2017 for $310,000 being a 83 square metre ground floor unit with a fitout in place. This showed $3,735 per square metre. Deakin is a secondary area occupied by medical and association tenants and private organisations. 

Owner-occupiers are dominating the market at present with access to finance and low interest rates providing the opportunity to purchase property via a superfund and obtain an asset for the future. 

The market performance is currently steady with values holding in most areas except Tuggeranong, where supply is higher than demand and some new mixed use developments are under construction.

"As we approach the later half of 2017 and beginning of 2018 the market should start to show signs of growth due to a number of Commonwealth Government lease deals coming to fruition and the opportunity for rental deals to provide some growth for the next few years," say HTW in the review. 

No new developments are due in the short term which will put pressure on the current space available. Until the mooted building projects re-commence there is no new space available in the ACT.

However, space is available in most areas at the lower end of the price range within the $250,000 to $500,000 range primarily in mixed use developments at ground and first floor levels, conclude HTW.

Tags: 
Canberra Office Market

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