Uptick in public and private sector jobs boosts office leasing market

Employment growth is driving a recovery in Canberra’s office leasing market, according to global commercial real estate firm JLL.

JLL managing director – ACT, Andrew Balzanelli, said the recovery has been led by an uptick in jobs in  the public and private sectors.

“The strong positive net absorption recorded in the 12 months to the first quarter of 2016 is joined by a reduction in sublease vacancy which is currently 0.7 per cent of total office stock,” Balzanelli said.

“Driving the recovery is the casualisation of the public sector, which is seeing strong growth in non-ongoing APS employees, and the professional services sector hiring approximately 1000 people.”

Momentum in sales and leasing activity indicates that occupiers and investors of local and international origin are seeing value in Canberra’s office market, he said.

“The 13.4 per cent vacancy rate for Canberra is not reflective of the positive performance of the market.

“There are four precincts where the A-grade vacancy is sub 5 per cent, being Barton, Civic, the Outer North and the Outer South.”

The city has the second tightest A-grade CBD office market in Australia, Balzanelli said.

Leasing activity has included the Department of Immigration and Border Protection re-signing medium-term leases within the city and committing to a long-term lease at  Canberra Airport for 30,000 square metres.

“The consolidation of the Department of Finance into One Canberra Avenue in Forrest for 25,000 square metres, along with the commitment of the ACT Health consolidation in Phillip of 11,000 square metres, is driving this further,” Balzanelli said.

JLL head of sales and investments – ACT, Michael Heather, said on the investment side there is a narrowing of yield spread between Canberra, Sydney and Melbourne.

“Office asset values have increased by 7.1 per cent over the 12 months to 1Q16 and we expect Canberra to outperform other CBD office markets between 2015 and 2020. It offers a very stable investment proposition for buyers.”

In the 12 months to June, a number of large and small office assets have been sold, including 255 London Circuit in the CBD, 73 Northbourne Avenue, Aviation House in Woden and 64 Allara Street, Heather said.

“This demonstrates the depth of activity in the Canberra market,” he said.