2023-10-05-莱坊-Canberra_Office_Market_August_2023_6页_3mb

Canberra Office Market Summary (August 2023)

Core Content Overview

The Canberra Office Market report for August 2023 provides a detailed analysis of the current state of the office market, including vacancy rates, rental growth, development activity, and investment trends. It highlights the market's resilience and attractiveness to investors due to its blue chip tenant profile and competitive yields.

Key Market Indicators (July 2023)

Notes:

• Vacancy rate in Canberra remains the lowest among major capital cities, at 8.2% as of July 2023.
• Prime space in the Civic and Parliamentary precincts continues to see strong demand.
• Secondary market vacancy has decreased to 11%, the lowest since 2012.
• Rental growth is steady, with prime net face rents in Civic and Parliamentary precincts rising 3.6% y/y to $446/sqm, and secondary net face rents growing 1.9% y/y to $355/sqm.
• Prime incentives in Civic and Parliamentary precincts are at 26%, contributing to net effective rent growth of 2.3%.

Positive Tenant Demand

• Government tenants remain a key driver of demand in the A Grade market.
• Private sector demand for smaller suites (under 500 sqm) is increasing, contributing to a decline in secondary vacancy.
• Prime vacancy in Barton is still non-existent, while in the Civic precinct it stands at 7.1%.
• Prime net effective rents have increased due to high incentives and rental growth, despite a softening in yields.

Steady Development Pipeline

• 2022 saw a record 113,467sqm of new office supply, with 95% of it classified as prime stock.
• Completions in H1 2023 totaled 15,394sqm, across three assets:
  • 90 Denison Street (7,594sqm)
  • 13-15 Challis Street (4,800sqm)
  • 23 Marcus Clarke Street (3,000sqm) – partial refurbishment completed.
• Upcoming developments over the next 18 months include:
  • 9-11 Molonglo Drive (19,463sqm)
  • One City Hill (34,086sqm)
  • 23 National Circuit (4,500sqm)
  • 2 Faulding Street (6,600sqm)
  • Section 96 (37,000sqm), expected to be delivered by 2026.

Subdued Investment Activity

• Investor activity has been relatively subdued due to higher funding costs and uncertain economic conditions.
• Recent sale: 54 Marcus Clarke Street was sold by Centuria Property Funds to Evri Group for $23 million, fully occupied with a 2.7 year WALE and a core market yield of 7.63%.
• Yield softening is ongoing, with prime yields in Civic and Parliamentary precincts expanding by 103 bps to 6.5%, and secondary yields softening by 115 bps to 7.5%.
• Town Centres prime yields have also softened by 99 bps to 7.8%.
• Capital values have declined since late 2022 due to yield softening, despite steady rental growth.

Recent Tenant Commitments

Conclusion

The Canberra office market remains resilient with low vacancy rates, steady rental growth, and strong tenant demand. Despite yield softening, the market's blue chip tenant profile and competitive yields continue to attract investors. Development activity is expected to continue, with a number of new projects set for completion over the next 18 months. Investor confidence is anticipated to rise as economic conditions stabilize and the RBA pauses interest rate increases.

Contact Information

• Research:

  • Marco Mascitelli: +612 9036 6656 | Marco.Mascitelli@au.knightfrank.com
  • Naki Dai: +612 9036 6673 | Naki.Dai@au.knightfrank.com
  • Ben Burston: +612 9036 6756 | Ben.Burston@au.knightfrank.com

• Valuations:

  • Martin Elliott: +614 076 60375 | Martin.Elliott@au.knightfrank.com

• Office Leasing:

  • Nicola Cooper: +614 237 73479 | Nicola.Cooper@au.knightfrank.com

• Capital Markets:

  • Nathan Dunn: +614 882 16406 | Nathan.Dunn@au.knightfrank.com

• Sales and Leasing:

  • Kellie O'Connor: +614 993 50757 | Kellie.oconnor@au.knightfrank.com

Knight Frank Research Reports are available at knightfrank.com/research.