Adelaide office absorption breaches 10-year quarterly average

Net absorption hit 3,500sqm in Q4 2024.

According to a JLL report, net absorption in Adelaide’s office sector totalled around 3,500 sqm in Q4 2024 – a significant decrease compared to previous quarter’s reading of approximately 20,400 sqm. 

Despite the slowdown in Adelaide CBD office demand, net absorption remains above the 10-year quarterly average of around 2,200 sqm.

Here’s more from JLL:

The headline vacancy rate decreased 0.2 percentage points (pps) to 15.6% over the quarter. The prime grade vacancy rate also decreased 1.4 pps to 14.7%, driven by expansionary and relocation activity by large occupiers (>1,000 sqm).

No major completions are recorded during Q4 2024

No major completions were recorded over the quarter in the Adelaide CBD. There are currently two projects in the supply pipeline under construction, totalling 42,700 sqm, and one project with plans approved, totalling 2,300 sqm.

A 21,000 sqm office tower by Kyren Group at 50 Franklin Street is set to be complete in Q3 2025. Additionally, ICD Property is developing an office tower on Grote Street, anticipated to complete by Q3 2026.

Yields are unchanged over the quarter

Average prime net face rents increased 1.6% quarter-on-quarter to AUD 493 per sqm per annum, reflecting year-on-year growth of 5.2%. Average prime net effective rents increased 1.6% to AUD 195 per sqm per annum, with year-on-year growth of 5.7%.

Average prime midpoint yields were stable at 7.75% over the quarter. There remains a spread between buyer and vendor expectations but this gap has narrowed over the past 12 months. Over the past 12 months, average prime midpoint yields have softened 50 bps.

Outlook: Demand expected to slow but remain positive over short term

Tenants continue to show interest in expanding and centralising to the Adelaide CBD which is anticipated to support demand levels over the near term. It is expected that preference will remain for quality prime stock.

As economic conditions continue to stabilise, investor confidence and assets brought to market are also expected to increase. The prime yield cycle forecast has been revised and is projected to trough at the end of 2025.