Adelaide’s largest office building now under construction

It will have 40,000sqm of office space.

Corporate business rationalisation and spatial streamlining continued in 1Q21 according to JLL, resulting in negative quarterly net absorption. Conversely, demand from local small to medium enterprises (SMEs) has been generally positive. Furthermore, it was announced in January that Services Australia pre-committed to 28,500 sqm of space at 52-62 King William Street, representing 70% of the building. 

Three new developments commenced construction in 1Q21, including what will be Adelaide’s largest office building. Charter Hall commenced construction on its mixed-use tower at 52-62 King William Street, comprising 40,000 sqm of office space and 3,000 sqm of retail on the ground floor. 

Here’s more from JLL:

Average prime gross effective rents held firm in 1Q21. With leasing enquiry from SMEs generally positive over the first three months of the year, average incentives in the prime grade held firm in 1Q21. With average prime net face rents also unchanged over the quarter, average prime gross effective rents were stable at AUD 293 per sqm p.a. 

There were two major transactions (>AUD 5.0 million) recorded in 1Q21, totalling AUD 24.1 million, both from interstate investors. Firstly, Perth-based syndicator Acure Asset Management purchased 111 Gawler Place from a local private investor for AUD 18.0 million. Secondly, Melbourne-based Pelligra purchased 153-163 Grenfell Street from a Brisbane-based private investor for AUD 6.1 million. 

Other key figures:

16.9% Vacancy: Headline vacancy increased marginally by 0.3 percentage points to 16.9%. Prime grade vacancy increased modestly by 0.2 pps to 15.4%. Similarly, secondary vacancy increased by 0.3 pps to 17.9%. Sub-lease vacancy continued to trend upwards, increasing from 2.1% in 4Q20 to 2.4% this quarter.

-4,000 sqm Net absorption: Net absorption over the quarter was -4,000 sqm with negative demand recorded in both grades. This marks a fourth consecutive quarter of negative net absorption across both prime and secondary grades and directly coincides with the commencement of the COVID-19 health crisis and associated economic downturn. 

92,200 sqm Construction: Total supply currently under construction is 92,200 sqm with delivery of most of the space expected in late 2022 and into 2023. The medium-term supply pipeline is growing with another major project receiving development approval in 1Q21. The Government of South Australia awarded the development of its 35,000 sqm Entrepreneur & Innovation Centre, within the Lot Fourteen technology precinct to Quintessential Equity in March.

5.00-7.00% Yields: Average prime yields were unchanged this quarter. However, Ongoing investor demand for higher quality secondary assets resulted in a compression of yields in 1Q21. Upper end secondary yields compressed by 25 basis points (bps) to a new range of 6.00% - 8.50%