Key vacancy contracts in Canberra continue to 5.5%, the lowest level since 2008


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

Nationally, the figures showed a positive net take-up of 14,200 sqm in CBD office markets in 1Q22 and 163,300 sqm over the 12 months to March 2022. Vacancy in the national CBD office market shrank 0.2 percentage point to 13.5% in 1Q22 .

JLLs Head of Office Leasing – ACT, Andrew Balzanelli said: “Canberra’s office market continued to record positive net take-up of 12,600 sqm in the first quarter of 2022, after strong net take-up in 2021 totaling 35,800 sqm for the year. Most of the net take-up was concentrated in prime space (33,000 m² for 2021).”

As a result of positive demand, the overall vacancy rate in Canberra fell to 5.5%, the lowest level since 2008. The prime vacancy rate fell by 0.8 percentage points to 2.8% in the first quarter of 2022, the tightest prime market in all states.

Mr Balzanelli said: “We saw an increase in office leasing activity in the first quarter of 2022, particularly in March. We have seen a 29% increase in the number of tenant statements coming to market YTD compared to January-March 2021, with a 117% increase in February-March demand, with 13 notes in March covering 23,425 sq ft. The public sector continued to drive leasing demand in Q2 22, with the ACT government fully occupying a significant pre-released space seized.

“With the upcoming federal election due in a few weeks, we expect a flat quarter of rental activity for the remainder of 2Q22 as the government has now entered concierge mode and rental decisions have been put on hold. However, private sector demand is likely to remain stable, especially from groups that win government contracts and need to increase the workforce,” said Mr Balzanelli.

JLLs Office Leasing Associate Director, Troy McGuinness said: “Demand and deal activity under 500sqm remains strong in the first quarter of 2022. There is an influx of demand for smaller ‘start-up’ properties from established service providers in these industries, including groups that already have a footprint in canberra.

“In addition, activity in the less than 150 sqm category has declined, indicating that many companies are still testing work-from-home models and looking for opportunities in coworking environments as people return to the workplace,” said Mr McGuinness.

There is still growth in the base rent in A-class and B-class shares of better quality. Net effective rents increased by 0.6% over the quarter. Growth was driven by face rents, while incentives remained stable. Secondary net effective rent increased by 1.2% in 1Q22.

JLLs Office Leasing Director, Aaron Green said, “Defence, government, cybersecurity and government-focused professional services are the key growth sectors in the ACT. Defense and Commonwealth security tenants have shown the most aggressive growth trajectories, with significant commitments to new market offerings. 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 expected to be strong for the remainder of 2022, with the creation of new neighborhoods and hubs as the focus for developers. Fill vacancy on some assets is expected to increase vacancy. However, the capital will remain Australia’s tightest CBD office market into 2022, given the remarkable resilience of the Canberra market. JLL Research predicts vacancy rates will remain in the single digit area for the next three years,” said Mr Green.

JLL Research is currently tracking 161,000 sqm of space under construction in eight developments, including a renovation at 5 Constitution Avenue (12,000 sqm). The earliest completion is 6 Brindabella Circuit (21,000 m²), which is expected to be completed in 2Q22. Section 63 is the largest office development in the current pipeline with 40,000 m² of office space under construction.