Tide turns in Adelaide office market as economy fires
The tide has turned in Adelaide’s office sector, with a resurgence of the state’s key growth industries boosting the market to its strongest position in several years.
19 Jun 2018
CBRE’s Andrew Bahr said aligning with general improvements and confidence in South Australia’s economy, the office market was rapidly transforming, returning to positive territory not seen since pre-GFC.
“For the first time in more than two years, lease expiry is not the only reason tenants are enquiring on space. Expansion, growth and new entrants are becoming increasingly common, which is a clear indication of strong improvements in the market,” Mr Bahr said.
“The engineering sector has traditionally been the best barometer of growth in the market and this sector alone is in growth mode. Coupled with increasing demand – be it direct or indirect, from the defence, resource and health sectors – the sentiment is shifting with a strong upswing. Unlike last time we saw this type of activity, this upswing is not just about resources, we now have three strong pillars of growth that should provide a more sustainable outlook longer term.”
According to CBRE Research, vacancy of ‘new generation’ prime buildings built between 2006 and now is 7.5%.
Mr Bahr said with a number of large deals currently being finalised in the market, this vacancy was likely to fall even further in the next few months to only 5.5%.
“The limited stock available in these “new generation’ buildings means it is getting more and more difficult to find more than 2,000sqm of contiguous space in these buildings,” Mr Bahr said.
In the past three months, CBRE has completed numerous deals over 1,000sqm highlighting the strengthening conditions underway in the market.
“The upturn in demand is likely to drive a quicker than expected tightening in incentives in the top end of the market – potentially as low as 25% by the end of the year,” Mr Bahr explained.
“This will subsequently flow through to the better B-grade buildings in time and encourage further refurbishment and upgrades of some of the older style buildings, which has ultimately been the main reason the current overall vacancy rate is as high as it is.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), 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 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 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.
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of 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 https://www.cbre.com.