Adelaide office market overview (September 2016)

Highlights:

The Adelaide CBD vacancy rate increased from 14.1% to 15.8% in the six months to July 2016. This was largely the result of an increase in supply with the completion of refurbished space.

The disparity between occupancy markets and capital markets continues to widen. In the six months to July 2016, prime yields have compressed whilst effective rents have decreased.

Forecast supply in the CBD remains subdued. Mooted development includes Charter Hall’s GpO development and the Walker Corporations Riverban Precinct redevelopment.

Key Findings:

In the six months to July 2016, CBD prime yields have firmed by six basis points and secondary yields have firmed by five basis points, despite ongoing weak leasing fundamentals.

C and D grade office space accounts for approximately one third of the market. These two grades contain the highest vacancy at 16.8% and 20.0% respectively.

In the six months to July 2016, average prime CBD incentives increased marginally from 28% to 29%, resulting in a decrease in average effective rents.

Following $531.45 million of sales in Q1 2016, sales activity moderated in Q2. With the current stock on the market it is likely that H2 2016 will produce increased volumes and stronger results.

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