Canberra annual net office absorption hits 10-year high in 2022
Net absorption totalled 47,600sqm during the year.
The Canberra office market continued to record positive net absorption of about 12,800 sqm over the quarter, according to a recent JLL report.
Annual net absorption for 2022 totalled about 47,600 sqm, the largest recorded since 2012. As a result of the positive demand, the headline vacancy rate fell to 7.0% in 4Q22.
Here’s more from JLL:
Leasing activity continued to be driven by the public sector in 4Q22. The largest move was the Department of Agriculture, Water and Environment relocating into pre-committed space (35,000 sqm) at the recently-completed 72 Northbourne Avenue. Small tenant activity (<1,000 sqm) was another key driver of demand.
Three offices complete over the quarter
Three office completions totalling about 49,800 sqm were recorded over 4Q22. The largest of these completions was Civic Quarter 2 (35,000 sqm) which was 100% leased to the Department of Agriculture, Water and Environment. The second largest completion was 5 Constitution Avenue, City (12,047 sqm) which had not secured any pre-commitments at practical completion.
JLL is currently tracking 43,000 sqm of supply under construction across two developments in Canberra. The earliest completion will be 90 Denison Street, Deakin (8,000 sqm), which is expected to complete in 1Q23. Section 63 is the largest office project with 35,000 sqm of office space under construction, and has an expected completion date in 4Q23.
Minor uplift in face rents offset by a minor uplift in incentives
Prime net effective rents decreased by 1.1% over 4Q22. Although prime net face rents marginally increased by 0.4% over the quarter, the decrease in effective rents was driven by an uplift in prime incentives of 0.4 ppts to 24.8%. Incentives are at the highest level since JLL began tracking this metric in 1987.
The Canberra office investment market recorded limited activity over the quarter, with only one transaction recorded. The Geoscience complex was sold by Real IS to Charter Hall for AUD 363.5 million.
Outlook: Government sector enquiries expected to show steady growth
The 2022-2023 federal budget update outlined significant headcount growth in certain government departments such as Climate Change and Employment. While some Commonwealth employees may relocate from other departments into the aforementioned ones, it is expected that the projected uplift in headcount growth will support some leasing activity in Canberra’s office market over the short term.
Prime net face rents are expected to rise steadily over 2023. However, as a number of tenants are anticipated to relocate into new developments over the coming years, the space that they will vacate will likely result in a continued uplift in incentives, dampening effective rental growth.
Note: Canberra Office refers to Canberra's office market (all grades).