Office vacancy rates down in Adelaide: HTW Commercial

Office vacancy rates in the Adelaide CBD decreased from 14.7% to 14.2%, led by reductions in both the core and fringe sectors of the Adelaide market, according to the latest report from Herron Todd White.

The valuation firm found, Premium and A grade vacancy has been recorded at 2.6% and 14.3% respectively.

While that 2.6% premium grade vacancy figure seems very low, there is a very limited amount of premium space on offer in the Adelaide CBD so that should be taken into account.

These vacancy figures support the nation-wide push for more efficient and more sustainable office spaces as climate change discussions continue to dominate the political landscape.

As a result of the reducing vacancy rates, office property yields have remained solid, with A grade space in the Adelaide market recording yields of 6% to 8%.

The report authors said, "in comparison, Sydney and Melbourne A grade office properties are fetching 4.5% to 5.5%, however the eastern states are recording higher levels of rental growth compared to the Adelaide market."

"Gross face rents for prime space in the Adelaide office market are currently around $550 per square metre while A grade space is fetching $370 per square metre.

"The latest figures from the PCA have analysts predicting 2% to 2.5% growth for premium space in Adelaide over the next few years. In addition, the current incentive levels for premium and A grade office spaces are expected to decline over the next two years to a level around the 25% to 30% mark."

Sales are down from the record levels set in 2018.

There are however some major offerings currently on the market, notably 25 Grenfell Street (pictured in title), which was listed for sale just two years after being purchased by Credit Suisse for $125 million.

Furthermore, there are some significant developments that will increase the supply side of the office market throughout the second half of 2019.

One such development is GPO Tower, currently under development it will add 24,500 square metres of space to the core market, located at 2-10 Franklin Street.

Upon the project’s completion late this year, major tenant BHP will occupy 40% of the building and the global mining giant’s name will illuminate the Adelaide skyline as they have secured the naming rights of the new office tower as part of the lease agreement.

The BHP lease now takes the committed net lettable area of the building to roughly 90%, as the South Australian Attorney General’s department has pre-committed to a lease of 50%.

The pre-commitment levels mean that although the building is yet to be completed, there will only be roughly 10% or 2,450 square metres of lettable space available when the office building officially opens late this year.

However further additions by way of new development in the Adelaide market will be scarce.

The Festival Plaza development at Station Road, which encompasses over 43,000 square metres of lettable area, is not predicted to reach completion until 2021. Plus 73-85 Pirie Street, the old Planet Nightclub site that has lay dormant since 2004, has only now been granted