2021-09-14-莱坊-Adelaide_Office_Market_September_2021_8页_5mb

Adelaide CBD Office Market Summary - September 2021

Core Market Overview

The Adelaide CBD office market has shown resilience and strength, with a decrease in vacancy rate from 16.0% to 15.7% as of September 2021. This decline is primarily attributed to the reduction in vacancy within new generation prime buildings, which are now in high demand.

Key Insights

• Prime Vacancy Rate: 15.7% (as of September 2021)
• Prime Incentives: Average decreased to 31.3%
• Prime Gross Effective Rents: Slightly increased to $380/m²
• Prime Yields: Ranged between 5.0% and 5.75%, with an overall compression of 62 basis points since January 2021, reaching 5.33%
• Net Absorption: Positive 3,026 m² over six months, with Prime showing +6,566 m² and Secondary showing -3,540 m²

Demand Trends

• New Generation Prime Stock: Sustained demand, especially from blue chip companies and government entities.
• Major Tenants: Secured large NLA in A-grade buildings, such as:
  • SA Water renewed 17,477 m² at 250 Victoria Square
  • Renewal SA locked in 1,452 m² at 11 Waymouth Street for 10 years
  • Services Australia and CBUS have precommitments at 60 King William Street (71.25% committed)
  • DPTI has precommitments at 73-85 Pirie Street (100% committed)

Future Supply Forecast

• New Supply: Expected to be limited until 2023+, with forecasted 116,500 m² of NLA.
• Key Developments:
  • 108 Wakefield Street (15,586 m² office, 452 m² retail), KYREN – 0% committed (Q4 2020)
  • 60 King William Street (40,000 m² office, 3,000 m² retail), Charter Hall – 71.25% committed
  • SAHMRI 2 (20,000 m² office), Commercial & General – 2025
  • Festival Plaza (44,500 m² office, 4,500 m² retail), Walker Corporation – 2023+
  • Central Market (15,000 m² office, 6,000 m² retail), ICD Property Group – awaiting commitment

Fringe Market Trends

• Vacancy Rate: Declined from 11.2% to 10.7%, driven by reduced stock availability and increased demand.
• Prime and Secondary Yields: Increased by 50 and 100 basis points respectively, reaching 5.80% and 6.28%.
• Fringe Gross Effective Rents: Prime remained steady at $374/m², while secondary increased from $260/m² to $262/m².
• Tenant Commitments:
  • GPA Engineering leased 3,100 m² at 120-121 Greenhill Road
  • Commonwealth Government and SA Government committed to large NLA in core areas

Investment Activity

• Major Sales:

  • 21-25 Nile Street, Port Adelaide sold for $62.75M to Centuria Capital
  • 60 Wakefield Street & 21 Divett Place sold for $51.00M to Charter Hall
  • 75 Hindmarsh Square sold for $40.50M to Harmony Property
  • 22 King William Street sold for $47.02M to Intergen Property Partners

• Investor Interest: Strong demand for core assets, particularly those with long-term lease covenants, especially from government tenants.

Market Outlook

• Capital Circulation: Unprecedented capital flow into the Adelaide market, with record sales expected in the second half of 2021.
• Yield Compression: Continued despite economic disruption, due to lower interest rates offsetting uncertainty.
• Fringe Strength: Highlighted as a safe haven with perceived lifestyle benefits, including high traffic, corporate exposure, and car-parking availability.

Conclusion

The Adelaide CBD office market is showing strong demand, particularly for new generation prime stock, with vacancy rates decreasing and yields firming. The fringe market is also experiencing positive trends, with reduced vacancy and increased yields. With limited new supply until 2023+, the market is expected to remain stable and attractive for investors, especially those looking for long-term lease covenants and core assets.