Challenging conditions in Adelaide’s office market are underpinning a shift in tenant sentiment, with first impressions more important than ever as occupiers become more selective in their search for accommodation.
CBRE Advisory & Transaction Services – Office Director, Andrew Bahr, said quality was taking precedence in the current market, with demand being largely underpinned by lease expiries opposed to business growth.
“First impressions are more important today than ever before, with owners who can pull out the stops – including refurbished foyers, amenities and end of trip facilities – securing the bulk of tenant movements,” Mr Bahr said.
“The weaker demand conditions, while restrictive for market growth, have helped elevate the level of quality on offer, with owners having to adopt alternative strategies to entice new tenants, particularly in the secondary market.”
Mr Bahr said the outlook was more positive over the next three years, with it coinciding with the 10 year anniversary of the last major construction phase in the city.
“From 2017 to 2019, we expect to see a lot more lease expiry movement, which will help boost transaction activity. Furthermore, that flight to quality is as real in Adelaide as it everywhere else, which will continue to put pressure on the secondary market,” Mr Bahr said.
The development of Adelaide’s newest office precinct – the $235 million General Post Office (GPO) project – would help boost confidence in the market, Mr Bahr said.
“The recent precommitment from the South Australian Attorney-General’s Department to occupy the first tower in the precinct is expected to create some movement in the market,” Mr Bahr said.
“The GPO development is a prime example of the emerging next generation of office accommodation, which will reshape our market and underpin tenant demand.”
CBRE’s latest MarketView report highlighted the completion of two major office refurbishments at 1 King William Street and 81 Waymouth Street underpinned a rise in office vacancy to 15.8% in July 2016 – the highest level in 15 years.
Rising vacancy has also seen a decline in effective rents and incentives now at all-time highs in the Adelaide CBD.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.