APPD Market Report Article

Adelaide

May 31, 2022

0.9%

AUD 295

Decline
Slowing

Occupier demand remains positive in 1Q22

  • Quarterly net absorption reached approximately 7,200 sqm – marking a fourth consecutive quarter of positive net absorption. This represents the first time this has occurred in the Adelaide CBD since 2010.
  • The technology sector was a key driver of demand in 1Q22 with both PwC and Deloitte expanding operations to increase its cybersecurity, artificial intelligence and data analytics capabilities.

Another major office tower commences construction in 1Q22

  • Vacancy continued to trend downwards in the Adelaide CBD. Headline vacancy decreased to 14.6% – the lowest vacancy rate recorded in the market in over two years. Occupiers continued to prefer better quality space with prime grade vacancy decreasing 1.2 percentage points to 10.8%.
  • A 40,000 sqm office tower commenced construction in 1Q22. Walker Corporation’s Festival Plaza Office Tower got underway, underpinned by a 12,000 sqm pre-commitment by Flinders University. This adds to one of the largest waves of new supply ever recorded in the Adelaide CBD and takes total supply under construction to 133,200 sqm, representing 9.2% of total stock.

Prime net effective rents remain unchanged

  • A quarterly increase in average prime net face rents (+0.8% q-o-q) was offset by increasing incentives in the quarter. As a result, average prime net effective rents were broadly unchanged.
  • Average prime yields were unchanged over the quarter at 4.75%-6.75%.

Outlook: Demand to be supported by technology and health sectors

  • It is expected that the technology and health sectors will continue expansionary activity in 2022, underpinning demand. Additionally, the professional services with digital and health linkages will also support net absorption levels.
  • Investment demand will remain positive with challenges around unlocking investment product a downside risk to transaction volumes over the short term.

Note: Adelaide Office refers to Adelaide's CBD office market (all grades).

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