2022-09-27-莱坊-Canberra_Office_Market_September_2022_6页_4mb

Canberra Office Market Summary (September 2022)

Core Content

Canberra's office market in September 2022 is characterized by a mix of new supply, sustained demand, and evolving yield trends. The market remains resilient despite recent challenges, with vacancy rates and rental growth continuing to reflect strong fundamentals.

Key Insights

• Vacancy Rates:

  • The total office vacancy rate in Canberra reached 8.6% as of July 2022, the lowest among eastern seaboard capital cities.
  • Secondary vacancy rates dropped to 11.4%, its lowest level since 2013, due to increased demand from both government and private sectors.

• Rental Growth:

  • A-grade rents in the Civic and Parliamentary precincts increased by 3.7% YoY to $431/sqm (gross $524/sqm).
  • Secondary rents rose by 2.5% to $348/sqm (gross $446/sqm).
  • Prime net effective rental growth stood at 0.7% to $295/sqm.

• Yield Trends:

  • A-grade yields in the Civic and Parliamentary precincts softened by 12.5bps to 5.45%, while secondary yields averaged 6.5%.
  • Town centre A-grade yields also softened by 12.5bps to 7%, and secondary yields in town centres dropped by 25bps to 7.7%.
  • Further yield softening is expected as funding costs and inflationary pressures continue to affect the market.

• New Supply:

  • New developments, including refurbs, totaled 64,743sqm over the first half of 2022, the largest supply injection since 2014.
  • Major developments include:
    • 27 Scherger Drive (8,670sqm): Fully leased to the federal government.
    • 6 Brindabella Circuit (20,185sqm) and 25 Catalina Drive (23,000sqm): Speculative developments.
  • A significant pipeline of new supply is expected over the next 18 months, with developments like Civic Quarter Stage 2 (33,000sqm), 90 Denison Street (8,000sqm), and Blocks 10&11, Section 100 (34,234sqm) either under construction or seeking approvals.

• Investor Activity:

  • Investment volumes for 2022YTD reached $160 million, indicating strong investor interest.
  • Notable transactions include:
    • 39 Brisbane Ave, Barton sold for $41 million on a 5.04% yield.
    • 33 Allara Street sold for $71.25 million on a 5.7% yield.
    • TGA building at 136 Narrabundah Lane acquired by Charter Hall for $21.5 million.
    • Lovett Tower purchased by a private investor for $26.7 million.
  • Capital remains available for deployment, with major assets expected to transact in the second half of 2022.

• Tenant Commitments:

  • There is active tenant activity, particularly in the Civic and Barton precincts.
  • Major tenants include:
    • ABCC at 2 Constitution Ave, Civic (384sqm).
    • ACQSC at 60 Marcus Clark Street, Civic (1,772sqm).
    • Sparke Helmore at 224 Bunda Street, Civic (980sqm).
    • Advanced Navigation at 40 Macquarie Street, Barton (328sqm).
    • Concept Six at 60 Clarke Street, Civic (210sqm).

Market Indicators (July 2022)

Summary of Trends

• New Developments:

  • A significant amount of new supply is coming online, particularly in the Airport precinct.
  • The Airport precinct has seen a notable rise in vacancy due to speculative developments, reaching 17.1%.
  • Civic precinct remains strong with a low vacancy rate of 4.9%.
  • The Parliamentary precinct maintains a very low vacancy rate of 1.4%.

• Investor Activity:

  • Investor appetite remains steady, with activity concentrated in core and secondary markets.
  • The total investment volume for 2022YTD is $160 million.
  • Capital awaiting deployment is expected to transact in the second half of the year.

• Yield Compression:

  • Yields in A-grade and secondary markets have softened due to higher funding costs and inflation.
  • The core market yield in Civic and Parliamentary precincts is 5.25–5.75%, while in Town Centres it is 6.75–7.25%.
  • Secondary yields in Town Centres are 7.75–8.50%.

• Tenancy Activity:

  • Sustained demand from government tenants and growing interest in smaller spaces have driven positive net absorption.
  • Major tenants include Commonwealth DHA, Commonwealth TGA, and Commonwealth Agriculture.

Conclusion

The Canberra office market continues to show resilience, supported by strong demand and a healthy pipeline of new developments. While new supply has pushed vacancy rates slightly higher, particularly in the Airport precinct, the overall market remains robust. Yields are beginning to soften, but the market is still attractive due to low vacancy rates and positive rental growth. The market is expected to remain active with further developments and transactions anticipated in the coming months.