2024-10-21-莱坊-Canberra_Office_Market_September_2024_6页_999kb

Canberra Office Market Summary (September 2024)

Core Content Overview

The Canberra office market has shown steady rental growth supported by strong occupier demand from both public and private sectors. Despite a slight increase in vacancy rates, Canberra maintains the lowest vacancy rate among major capital cities, alongside Brisbane CBD. The market is characterized by a healthy development pipeline and a mix of supply additions and property transactions, though investment activity has been subdued so far in 2024.

Key Market Indicators

Main Points

1. Vacancy Rates

• Overall vacancy rate increased slightly to 9.5% in the first half of 2024, driven by supply additions rather than a decline in demand.
• Canberra's vacancy rate remains the lowest among capital cities, alongside Brisbane CBD.
• Prime vacancy in Barton is near 0.5%, reflecting strong demand and limited supply.
• Secondary market vacancy is at 10.4%, still below average levels.

2. Rental Growth

• Prime net face rents in the Civic and Parliamentary precincts increased by 2.4% annually to $457/sqm (gross $564/sqm).
• Secondary market saw 2.3% annual net face rent growth, averaging $363/sqm (gross $471/sqm).
• Incentives remain at all-time highs, with an average of 26.5% in the prime A Grade market, contributing to 2.1% net effective rent growth.

3. Supply Additions

• 37,030 sqm of new supply was added in H1 2024, bringing the total office stock to 2,397,006 sqm, a record high.
• Notable completed developments include:
  • 18 Marcus Clarke St, Civic (27,000 sqm) – 100% occupied.
  • 1 Taubman St, Symonston (3,437 sqm) and 2 Faulding St, Symonston (6,600 sqm).
• Forecasted supply additions over the next two years total ~115,000 sqm, including:
  • 9-11 Molonglo Drive, Airport (19,925 sqm) – under construction, expected to be completed in H1 2025.
  • 19 National Circuit, City (18,128 sqm) – under construction, expected to be delivered by H1 2026.
  • Section 96, City (34,000 sqm) – DA approved, expected to be delivered by H2 2028.

4. Investment Activity

• Investment activity in H1 2024 was subdued, with only $56.3 million in transactions.
• 10 Moore St, Civic sold for $28.2 million at a core market yield of 8.2%, reflecting a 19% capital loss for the seller.
• 243 Northbourne Ave, Lyneham sold for $28.1 million at a core market yield of 9.8%.
• With a more encouraging macro environment, transactional activity is expected to increase in the latter half of 2024.

5. Yield Trends

• Yields have softened over the past year, with the Civic and Parliamentary precincts seeing a 66 bps increase to 7.13%.
• Secondary market yields softened by 99 bps to 8.50%.
• Yield softening has impacted capital values, with a 20% decline in prime assets in Civic and Parliamentary precincts since mid-2022.
• Yields are expected to reach their peak in the medium term due to potential interest rate cuts and a clearer economic outlook.

Recent Transactions

Recent Tenant Commitments

Conclusion

The Canberra office market is experiencing positive rental growth and low vacancy rates, with the A Grade market remaining the most attractive. Supply additions are contributing to market diversity and options for occupiers, especially in precincts with historically limited availability. However, investment activity remains subdued, and yields have softened, affecting capital values. The market is expected to see increased transactional activity in the second half of 2024 as the macro environment improves.