The Adelaide office market has reached record heights as business confidence hits its highest level since 2009, says a new report from a major property company.
Colliers International’s CBD office research and forecast report for the second half of 2019 has found the Adelaide economy is booming and becoming more diversified.
“This acceleration of growth is contributing to continued confidence in the Adelaide property market,” Kate Gray, Colliers research director, said.
“The Adelaide economy is bucking the (growth) trend in comparison to the east coast.”
The investment market has been a driving force behind this movement, with a record $900 million plus of assets changing hands since 2018 she said.
“The noticeable trend is the depth of buyers actively looking in the market, from off shore investors to institutional and private interstate investors predominantly from Melbourne,” Alastair Mackie, Colliers’ national director of capital markets and investment services, said.
“Adelaide’s diversified economy and overall growth is being driven by several factors — most significantly the expansion of mining and tourism sectors, increased defence force spend, significant healthcare sector infrastructure investment and the Australian Space Agency headquarters at Lot Fourteen.”
The market has also seen marginal tightening in yields across the year. Colliers found A grade office assets had tightened 22 basis points and B grade office assets firmed by 25 points over the year.
The leasing market has mirrored this trend, seeing an increase in activity in terms of tenants committing and occupying space.
“Significant CBD commitments include BAE Systems and Boeing, both taking additional sublease space at 30 Pirie Street with Boeing taking 3000sq m and BAE systems taking 2000 sqm,” James Young, Colliers national director of office leasing said.
Total vacancy in the city has remained stable at 12.8 per cent with a subdued rental growth across the consolidated A grade sector at only 0.8 per cent growth.
‘New gen’ vacancy currently sits at 4.7 per cent, with this movement seeing gross face rents grow by 2.1 per cent with incentives sitting between 30 to 35 per cent.
“Proactive landlords are being rewarded with greater engagement with occupiers, giving them a greater competitive opportunity to transact and reduce letting up periods,” Mr Young said.
The report found the predicted growth in demand would lead to a continued centralisation towards the Adelaide CBD market at the expense of the fringe and metro markets.
“This boost will correlate directly with net absorption above the softer white-collar employment growth and centralisation which will see vacancy tighten ahead of precommitment driven supply events on 2023,” Ms Gray said
Adelaide is making national investment waves says Colliers Internationalby Richard Evans originally seen in The Advertiser, 17 September, 2019.
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