Adelaide office net absorption turns negative for the first time in a year

Quarterly net absorption was at -11,800sqm in Q2.

Quarterly net absorption in Adelaide’s CBD office market was negative at -11,800 sqm, after four consecutive positive quarters.

According to JLL, backfill space filtering into the market, from occupiers preparing to relocate into multiple new office towers which are near to completion, was a catalyst for the negative quarterly figure.

Here’s more from JLL:

Headline vacancy increased by 0.8 percentage points (ppts) to 15.4%. Prime vacancy increased by 2.2 ppts to 13.0%, while secondary vacancy decreased by 0.3 ppts to 17.1%.

No projects reached completion over the quarter. Three projects are set to complete over the second half of 2022, totalling 35,600 sqm.

Limited assets brought to market impact transaction volumes

A quarterly increase in average prime net face rents (0.5% q-o-q) was offset by increasing incentives in the quarter. As a result, average prime net effective rents were unchanged.

Average prime yields were unchanged over the quarter at 4.75-6.75%.

Outlook: Value-add investors expect to remain active in 2022

It is expected that the technology and health sectors will continue expansionary activity in 2022, underpinning demand. However, backfill space from new supply will likely place upwards pressure on vacancy.

Investment demand is expected to soften on the back of a less accommodative economic environment. Opportunistic investors are expected to remain active.