Rebound in net absorption in the Adelaide CBD over Q3 2024

• Net absorption was recorded at 20,400 sqm over Q3 2024 – substantially improved demand from Q2. Centralisation and expansionary activity by large occupiers (>1,000 sqm) in the public administration and financial services sectors were drivers of this result.
• The headline vacancy rate decreased 0.8 percentage points (ppts) to 15.8% over the quarter. Demand has been concentrated in prime grade space over the past 12 months (+45,700 sqm) to the detriment of secondary net absorption (-7,900 sqm).

One major completion recorded during Q3 2024

• One refurb-extension completion was recorded over the quarter at 150 Grenfell Street, totalling 9,600 sqm. In addition to a refurbishment of internal amenities, the project combined assets at 150 Grenfell Street and 162 Grenfell Street to create contiguous floor plates.
• There is 42,700 sqm in the supply pipeline currently under construction with the largest asset being Market Square Office Tower on Grote Street (21,700 sqm). The development is a seven-level building and is currently 58% pre-committed.

Prime yields hold firm in Q3 2024

• Average prime net face rents increased 0.4% to AUD 486 per sqm per annum and average prime incentives were stable. As a result, average prime net effective rents increased 0.5% to AUD 192 per sqm per annum.
• Average prime midpoint yields were steady 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 have softened 75 bps.

Outlook: Demand expected to remain robust over the short term

• Tenants continue to show interest in centralising to the CBD which is anticipated to support demand levels over the near term. The preference is anticipated to remain for quality prime stock.
• We are near the trough in the prime yield cycle with the trough projected to be at the end of 2024. As economic conditions continue to stabilise, investor confidence and assets brought to market are also expected to increase.