When you think of Canberra, you might think of public servants and a swathe of cement. But let’s take a look at what’s happened in the nation’s capital over the past year in terms of Canberra's commercial office leasing market.
Average A-Grade office gross rental rates in the Canberra CBD (Civic) remained relatively flat over the past 12 months at approximately $470 per square metre. Rates for comparable premises in non-CBD areas have also remained flat and are only slightly cheaper, averaging $450 gross per square metre.Incentive levels have also stayed relatively constant, averaging about 18% in the CBD and 20% in non-CBD areas. Average gross rental rates for B-grade CBD office premises increased by about 3% and now average about $420 gross per square metre. Non-CBD B-Grade premises experienced a similar increase and now average about $380 gross per square metre.B-Grade incentive levels increased slightly across the market, and now average about 24%.
Vacancy rates in the Canberra market have fallen over the past year. In the CBD they're sitting at around 3.5%, which is significantly lower than the national CBD average of just over 8%.Vacancy across the entire Canberra market (i.e. both CBD and non-CBD areas) are approximately 11%. This is a drop of about 1.5% over the previous year.
Commercial office stock levels have also declined slightly over the past year. However, approximately 70,000 square metres of commercial office space is currently under construction and expected to be progressively released throughout 2020/21.
The Canberra office market is typically resistant to commercial property trends in other Australian markets. This is largely due to the high proportion of government tenants (approximately 70%) occupying spaces on long-term leases. However, one national trend having an impact is the increasing demand for coworking spaces.
Coworking spaces provide flexibility by allowing businesses, start-ups and independent contractors to share office space on flexible leases (or memberships). Popular coworking firms initially held off on entering the Canberra market due to the predominantly confidential, government-related work generally carried out there. However, Canberra’s entrepreneurial community is starting to buzz.
And the prices for coworking space in Canberra is on the rise. Last year the average cost of hiring a desk in a coworking space fell across the nation, except in Canberra where it rose by 40%. This sharp increase is likely to attract more coworking firms to the area. And, as we saw in Sydney and Melbourne, will likely stabilise coworking prices down over the next few years.
Tenant CS is a commercial tenant representation firm that provides tenant advisory services to businesses. We work across Australia, with a particular focus in Canberra, Sydney, Melbourne, Brisbane, Perth, and Adelaide.
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