Uptick in net absorption in the Adelaide CBD

• Net absorption totalled 7,500 sqm in Q1 2025 – an improvement compared to previous quarter’s reading of 3,500 sqm. Adelaide CBD’s net absorption continues to remain above the 10-year quarterly average of 3,300 sqm.
• The headline vacancy rate decreased 0.5 percentage points (pps) to 15.1% over the quarter. The prime grade vacancy rate also decreased 1.5 pps to 13.2%, driven by new business entrants and expansionary activity by large occupiers (>1,000 sqm).

No major completions recorded over Q1 2025

• No major completions were recorded over the quarter in the Adelaide CBD. There are currently two projects in the supply pipeline under construction, totalling 42,700 sqm, and one project with plans approved, totalling 2,300 sqm.
• A 21,000 sqm office tower by Kyren Group at 50 Franklin Street is set to be complete in Q2 2025. Additionally, ICD Property is developing Market Square on Grote Street, anticipated to complete by Q3 2026.

Yields were unchanged over the quarter

• Average prime net face rents were unchanged over the quarter at AUD 493 per sqm p.a. but reflected year-on-year growth of 2.6%. Average prime net effective rents decreased 1.7% to AUD 191 per sqm p.a., with year-on-year growth declining 0.4%.
• Average prime midpoint yields were stable at 7.75% over the quarter. There remains a spread between buyer and vendor expectations, but this gap has narrowed over the past 12 months. Over the past 12 months, average prime midpoint yields softened 50 basis points (bps).

Outlook: Demand expected to slow but remain positive over the short term

• Existing tenants and new businesses to the state continue to show interest in expanding and centralising to the Adelaide CBD, which is anticipated to support demand levels over the near term. It is expected that preference will remain for quality prime stock.
• Assets brought to market are expected to increase, as national economic conditions continue to stabilise. Prime office yields have reached the end of the softening cycle and are forecast to be stable in 2025.