Demand for quality space in Canberra's office market sees vacancy decline: Colliers

Canberra has seen a steady increase in A-Grade office stock since the move to more environment-friendly buildings started in 2000 and as businesses focus more on lessening their impact on the environment.

This demand for quality space has meant a decline in vacancies and an increase in building refurbishments,  according to Colliers International.

According to PCA data, A-Grade vacancy in Canberra CBD has more than halved in the past 24 months, decreasing from 8% to just 3.2%. 

The Parliamentary Precinct has experienced an even bigger drop over the same period, from 13.1% to just 1%. This is resulting in rental rate increases and a decline in incentives.

A younger generation joining the workforce also means changing needs and is also impacting tenants’ choice of office location and quality.

Michael Ceacis, director of Office Leasing at Colliers International said that with tenants seeking better offices but with limited new supply, there has been a spike in the number of buildings being refurbished. 

“Landlords are looking to attract tenants to older buildings by undertaking extensive building refurbishments. Building upgrades are not limited to modernising their buildings, but focus on improving building amenity, increasing building performance to make tenants more comfortable, lowering tenancy costs and decreasing a building’s environmental footprint.”

“Where this is most evident is in the CBD and Parliamentary Precinct,” he added.

Colliers International data shows that by 2020, Canberra’s CBD will have two new office buildings completed, injecting a total of approximately 30,000 sqm of A-Grade office space into the market. 

“We have no doubt that these new buildings will quickly attract quality tenants seeking to upgrade from lower grade office accommodation,” Michael said.

“We’ve seen a significant drop in A-Grade vacancy over the past couple of years and with limited stock coming to market, we expect this to have greater impact on B-Grade stock levels over the next couple of years.”

PCA data reveals only a slight drop in Canberra vacancy in the past 24 months from 13.4% to 12.8% in the CBD and 15.3% to 12.3% respectively in the Parliamentary Precinct. 

“The trends we’re seeing in the market, combined with our knowledge of stock being refurbished and new buildings being built, we expect to see an increase in overall vacancy in the Canberra market by 2020.” 

According to Colliers, A-Grade stock will still be in high demand and with vacancies remaining low, tenants will either be forced to stay put or look to occupy higher quality or refurbished B-Grade stock.   

“Majority of vacancy will be in B-Grade or lower, and this is partly due to the Department of Immigration and Border Protection vacating space buildings in the CBD,” he said.

The Parliamentary Precinct A-Grade vacancy is expected to tighten even further and the impact on overall vacancy in the precinct could reach as low as 5%, says Colliers.

“The outlook for the Belconnen Town Centre is not expected to change with larger tenants likely to remain. Conversely, some work needs to be done to make Woden and Tuggeranong more attractive to tenants which will benefit businesses located in those town centres,” said Michael.