Adelaide Office Market Update | H2 2023

Last updated:
Feb 27, 2024
Commercial Real Estate


Liam Drosinos
Liam Drosinos
Data Analyst

Follow us

Share this article

The Adelaide office market is the most affordable in Australia, and some emerging trends are making it more lucrative for businesses to establish themselves in the city.

Vacancy rates

The overall vacancy rate in the Adelaide CBD has increased to 19.3% off the back of an unprecedented volume of new stock (85,000 sqm) hitting the market, including Festival Plaza (40,000 sqm), which opened in Q4.

After rising for eight consecutive periods, the city's vacancy rate is now the highest in the country (and at its highest level since January 1995). Despite these increases, high-quality, large, contiguous spaces are still in short supply.

Over the next few years, several developments (circa 80,000 sqm) are planned to come online, including:

  • SAHMRI 2 (24,000 sqm / 75% pre-committed), scheduled for Q1 2024
  • 42-56 Franklin Street (21,000, no precommitments), scheduled for Q4 2025

In recent years, there's been a lack of large-scale occupiers relocating to Adelaide. So, it will be challenging for landlords to backfill vacant space as these new developments come online and existing businesses snap up new premises.  

Rents and incentives

Adelaide's Net Face rents rose over the last quarter, now at $485 psqm for prime grade and $320 psqm for secondary. This has mainly been driven by increased supply and backfill availability, putting tenants in a position of strength. Despite these rises, Net Effective rents remained stable over the quarter. This comes from inflationary pressures and outgoings increases, which we expect will subdue Net Effective rental growth for the next few years.  

Prime and Secondary incentives ended the period at 35.3% and 41.5%, respectively.

Adelaide Office Market Update | Image of river and buildings in Adelaide


Adelaide's sublease availability remains relatively steady at 0.4% of total stock, well below its previous peak in 2020/21. This is due to a number of factors, including:

  • Physical occupancy - Adelaide has experienced a solid return-to-office, with the occupancy rate nearing pre-covid levels.
  • Smaller tenants - Larger organisations typically look to cut costs through commercial subleasing. However, the Adelaide office market tends to attract a mix of small-to-medium businesses and government entities.
  • Less exposure - Around the country, sublease availability is primarily fuelled by financial and technology companies looking to eliminate excess space off the back of cost-cutting, headcount reductions and adoption of hybrid working arrangements. However, Adelaide has limited exposure to these types of companies.

Other trends affecting the Adelaide office market

Flight to quality 

In line with CBD markets nationally, the flight-to-quality trend remains strong, with high-quality  space becoming more affordable and gaining popularity amongst tenants looking to attract and retain talent. Buildings with green star ratings or sustainable initiatives are also experiencing growing demand. This is exemplified by the city’s net absorption rates, with Prime absorption remaining positive at circa 4,000 sqm and secondary stock recording a negative of circa -3,300. 

In the coming years, flight to quality is expected to remain the primary force behind leasing activity in Adelaide, and backfilling secondary spaces will continue to be challenging.

Older stock 

A large amount of Adelaide's secondary stock requires refurbishment. We are already seeing a rental and absorption divide between new/refurbished and secondary stock. And this gap will only increase over the coming years.

Residential conversions 

The Adelaide CBD office market consistently has a higher level of secondary grade stock compared to other capital cities, and in 2023, Adelaide's Lord Mayor, Jane Lomax-Smith, labelled much of the city's secondary stock "unusable, unwanted, unsustainable and ugly." In her statement, she called for under-utilised office spaces to be converted into residential dwellings. 

At the time, Clare Mockler, the City of Adelaide's former CEO, welcomed the idea of a pilot study and was recently informed by the State Commission Assessment Panel that an application for an office-to-residential conversion was being processed for the first time in nine years. It will be interesting to see the outcome of this trial and its knock-on effect.

Adelaide Office Market Update | Image of river and buildings in Adelaide

Tenant Representation Services, Adelaide

Tenant CS is a commercial tenant advisory service that offers tenant representation services in Adelaide. We also cater for businesses across Australia, in cities such as Sydney, Melbourne, Perth, Brisbane and Canberra, but also in regional areas.

We represent you, the tenant, and our in-depth knowledge of the Australian leasing market gives our clients the competitive advantage when it comes to finding a space or negotiating a commercial lease.

So, if you’re on the hunt for tenant representation in Adelaide, book a call with our team today!

You might also like:

You might also like

Got a project in mind?

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.