Canberra office vacancy rate tipped to keep falling

Canberra’s total vacancy rate is expected to continue to trend down until 2019, due to demand for office space from industry sectors, according to global commercial real estate firm JLL.

And that tighter vacancy rate could spark future development in Canberra.

JLL’s local managing director Andrew Balzanelli says the current total vacancy for Canberra is 13 per cent and he expects it to reach 11.6 per cent by 2019.

“The fact that prime vacancy has fallen to 8 per cent in the third quarter of 2016 from 12.8 per cent in the first quarter of 2015 – making it the second tightest behind only Sydney CBD – is telling of the leasing momentum that has been experienced particularly over the last 18 months,” he says.

Balzanelli says a large factor has been the relocation of government departments into higher quality office accommodation.

“This is due to new sustainability standards which require new leases or fitouts in offices tenanted by the government to have a minimum 4.5 NABERS energy rating,” he says.

Balzanelli says continued strong demand for new quality developments is supporting the need for new office development in the CBD where vacancy for prime grade office accommodation is now at 5.4 per cent.

“The Capital Property Group has begun leasing its new mixed office development within section 19 Canberra, known as Constitution Place,” he says.

On the corner of Constitution Avenue and London Circuit, Constitution Place will house the new 21,000-square-metre ACT government office building.

In addition, the Capital Property Group will build a new 12-level corporate office building of about 12,000 square metres of A-grade office accommodation due for completion in 2020.

“Furthermore, there are 27 projects in the development pipeline for Canberra’s office market, totalling 493,800 square metres,” Balzanelli says.

“Construction for these are very dependent on achieving a certain level of pre-commitment and it’s possible we could see a spike in pre-commitment for new projects due to these market factors.”

Three developments are fully pre-committed, the largest being Tuggeranong Office Park, Greenway, which is entirely pre-committed by the Department of Social Services.

On the commercial rental front, JLL’s head of strategic research, Australia, Andrew Ballantyne says they are on the rise.

“We believe the momentum in the leasing market will result in prime net effective rents increasing by 4.6 per cent, per annum, from 2017 to 2020,” he says.

Who’s in the market: Private and public sector demand for office space is expected to contribute to a lower vacancy rate.