Canberra Grade B office rents up 0.9% in Q2

Meanwhile, Grade A office rents rose by 2% during the quarter.

The flight to quality and cost transferring continue to support rental growth in Canberra according to a Colliers report, with market average A-grade net face rents rising by 2.0% in the second quarter of 2024, compared to B-grade growth of only 0.9%. 

“Despite a marginal decrease in some high-quality assets, market average incentives remain relatively stable, reflecting an increase in net effective rents for both grades. Market average rents are expected to grow at a slow pace due to the current low vacancy. However, incentives are expected to remain stable for the next six months,” the report said.

Here’s more from Colliers:

The construction of new office buildings and refurbishments in Canberra has continued albeit slowly, hindered by a slow leasing market and a mismatch between government tenant demand and available offerings. Both refurbishment projects at 7 London Circuit and 18 Marcus Clarke Street have had their final completion dates pushed back to Q3 2024. 

The new office construction for One City Hill (33,000 sqm) is now anticipated in 2025, pending pre-commitment and preservation of integrated fitout opportunities. Looking ahead, there is a shortage of new-generation office supply that will be able to genuinely cater for the Commonwealth Government Net Zero in Operation Strategy.

Demand from the private sector remains healthy, led by property services and legal tenants. However, challenging economic conditions have slowed down office decision commitments. Government briefs remain active, but a need for more suitable supply has constrained government commitments. 

Consequently, there has been an increase in renewal activity or the execution of extension options by some public tenants actively seeking new space. Due to the delays in project completions, moderate take-up activities are expected to hold the vacancy rate relatively steady in the July 2024 vacancy release.