Adelaide office vacancy rate hits record low in over two years

Headline vacancy dropped to 14.6% in Q1.

Data from JLL reveal that net absorption in Adelaide’s office property market increased for the fourth consecutive quarter, reaching approximately 7,200 sqm in the first quarter of 2022. This represents the first time this has occurred in the Adelaide CBD since 2010.

According to JLL, the technology sector was a key driver of demand in 1Q22 with both PwC and Deloitte expanding operations to increase its cybersecurity, artificial intelligence and data analytics capabilities.

Here’s more from JLL:

Vacancy continued to trend downwards in the Adelaide CBD. Headline vacancy decreased to 14.6% – the lowest vacancy rate recorded in the market in over two years. Occupiers continued to prefer better quality space with prime grade vacancy decreasing 1.2 percentage points to 10.8%.

A 40,000 sqm office tower commenced construction in 1Q22. Walker Corporation’s Festival Plaza Office Tower got underway, underpinned by a 12,000 sqm pre-commitment by Flinders University. This adds to one of the largest waves of new supply ever recorded in the Adelaide CBD and takes total supply under construction to 133,200 sqm, representing 9.2% of total stock.

Prime net effective rents remain unchanged

A quarterly increase in average prime net face rents (+0.8% q-o-q) was offset by increasing incentives in the quarter. As a result, average prime net effective rents were broadly unchanged.

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

Outlook: Demand to be supported by technology and health sectors

It is expected that the technology and health sectors will continue expansionary activity in 2022, underpinning demand. Additionally, the professional services with digital and health linkages will also support net absorption levels.

Investment demand will remain positive with challenges around unlocking investment product a downside risk to transaction volumes over the short term.

Note: Adelaide Office refers to Adelaide's CBD office market (all grades).