Office space demand rebounds
Released 10 August 2010
The Property Council's latest Office Market Report shows net absorption - the primary indicator of demand for office space - was 332,922 sqm over the six months to July, almost twice the 20-year average of 171,350 sqm.
Despite this swift return to positive demand, the amount of new office space added to the market (also well above the 20 year average) saw total Australian office vacancy rise from 9.3% to 10.0%, the highest since July 1999.
A total of 571,142 sqm of new office supply was added to the market over the past six months, well above the 20-year historical average of 316,635 sqm.
Property Council of Australia Acting CEO Ken Morrison said such a swift rebound in demand for office space is another sign of the relative health of the Australian economy.
"After two years of low or negative demand, this is a surprisingly strong result. However with business confidence still patchy and continuing concerns about global uncertainties, there are plenty of reasons to remain cautious about the future.
"Despite the positive demand story, the big supply increases and low stock withdrawals have pushed vacancies up to 10%, a result other countries will still envy."
Morrison believes the future office supply pipeline is slowing. The Office Market Report shows a total of 327,721sqm of office space is to be added to Australia's markets in the second half of 2010, in line with the 20-year average of 316,635sqm.
In 2011 a total of 404,071sqm is due to be added. The average historical annual supply average is 632,624sqm.
"While some markets have supply challenges in the near term, overall we will not see the same high levels of new supply over the next year," Morrison said.
"Future supply levels are forecast to be much closer to historical norms. The bulk of new stock to be added in the second half of 2010 will fall in Australia's CBD markets, which are more able to absorb this new supply."