APPD Market Report Article

Adelaide

August 26, 2022

Andrew Ballantyne, Head of Research, Australia

-0.5%

AUD 295

Decline
Slowing

Backfill from future supply has begun to filter into the market

  • Quarterly net absorption was negative at -11,800 sqm, after four consecutive positive quarters.
  • Backfill space filtering into the market, from occupiers preparing to relocate into multiple new office towers which are near to completion, was a catalyst for the negative quarterly figure.

Incentives continue to rise, dampening effective rental growth

  • Headline vacancy increased by 0.8 percentage points (ppts) to 15.4%. Prime vacancy increased by 2.2 ppts to 13.0%, while secondary vacancy decreased by 0.3 ppts to 17.1%.
  • No projects reached completion over the quarter. Three projects are set to complete over the second half of 2022, totalling 35,600 sqm.

Limited assets brought to market impact transaction volumes

  • A quarterly increase in average prime net face rents (0.5% q-o-q) was offset by increasing incentives in the quarter. As a result, average prime net effective rents were unchanged.
  • Average prime yields were unchanged over the quarter at 4.75-6.75%.

Outlook: Value-add investors expect to remain active in 2022

  • It is expected that the technology and health sectors will continue expansionary activity in 2022, underpinning demand. However, backfill space from new supply will likely place upwards pressure on vacancy.
  • Investment demand is expected to soften on the back of a less accommodative economic environment. Opportunistic investors are expected to remain active.

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

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