Canberra’s headline vacancy contracts further to 5.5%, the lowest level since 2008

CANBERRA, 26 April 2022 – JLL Research has released 1Q22 statistics on national office markets, showing Canberra to have the lowest vacancy rate since 2008.

Nationally, the figures showed positive net absorption of 14,200 sqm was recorded across CBD office markets in 1Q22 and 163,300 sqm over the 12 months to March 2022. The national CBD office market vacancy rate contracted by 0.2 percentage points to 13.5% in 1Q22.

JLL’s Head of Office Leasing – ACT, Andrew Balzanelli said, “The Canberra office market continued to record positive net absorption of 12,600 sqm in the first quarter of 2022, following strong net absorption in 2021 totalling 35,800sqm for the year. The majority of net absorption was concentrated in prime grade space (33,000 sqm for 2021).”

As a result of the positive demand, Canberra’s headline vacancy rate fell to 5.5%, the lowest level since 2008. Prime vacancy rate decreased by 0.8 pps to 2.8% in Q1 2022, which is the tightest prime market across all states.

Mr Balzanelli said, “We saw an increase in office leasing activity in Q1 2022, particularly in March. We have seen a 29% increase in Tenant Representation briefs coming to market YTD compared to January-March 2021, with a 117% increase in demand from Feb-March recording 13 briefs in March for 23,425 sqm of space. The public sector continued to drive leasing demand in 1Q22, with the ACT Government fully occupying significant preleased space.

“With the upcoming Federal election to be held in a matter of weeks, we anticipate a flat quarter of leasing activity for the remainder of 2Q22 as the government has now entered caretaker mode and leasing decisions are put on hold. However, demand from the private sector is likely to remain stable, particularly from groups that win government contracts and need to grow headcount,” said Mr Balzanelli. 

JLL’s Office Leasing Associate Director, Troy McGuinness said, “Demand and deal activity below 500 sqm remains strong in Q1 2022. There has been an influx of enquiry for smaller “start-up” sized accommodation from established service providers in these industries, including groups that already have a footprint in Canberra.

“Further, activity in the sub 150 sqm category has tapered, suggesting that many businesses are still piloting working from home models as well as looking for opportunities in coworking environments as people return to the workplace,” said Mr McGuinness.

There continues to be base rental growth in A-Grade and better-quality B-Grade stock. Prime net effective rents increased by 0.6% over the quarter. The growth was driven by face rents while incentives remained stable. Secondary net effective rent increased by 1.2% in 1Q22.

JLL’s Office Leasing Director, Aaron Green said, “Defence, government, cyber security, and government facing professional services are the key growth sectors in the ACT. Defence and Commonwealth security tenants have shown the most aggressive growth trajectories, with significant commitments to new market supply. The renovations of 3 Constitution Avenue (9,000 sqm) and 15 Constitution Avenue (7,500 sqm) were completed in 1Q22, and both assets were fully occupied by the ACT Government.

“The supply pipeline is forecast to be strong for the remainder of 2022, with the creation of new precincts and hubs the focus for developers. The backfill vacancy of some assets is anticipated to push the vacancy upward. However, the capital city will remain Australia’s tightest CBD office market over 2022, given the remarkable resilience of the Canberra market. JLL Research projects the headline vacancy rate to remain in the single digit territory over the next three years,” said Mr Green.

JLL Research is currently tracking 161,000 sqm of space under construction across eight developments, including one refurbishment at 5 Constitution Avenue (12,000 sqm). The earliest completion is 6 Brindabella Circuit (21,000 sqm), which is expected to complete in 2Q22. Section 63 is the largest office development in the current pipeline with 40,000 sqm of office space under construction.