Small tenants contribute to positive demand

• Canberra recorded approximately 5,400 sqm of net absorption over the quarter, driven by small tenants (<1,000 sqm) expanding and relocating into the Barton precinct. The majority of positive quarterly demand was concentrated in prime grade space.
• As a result, the Canberra prime vacancy rate decreased from 6.4% to 6.1%. The secondary vacancy rate also decreased marginally, from 11.9% to 11.8%, driven by small tenant leasing activity.

No office completions over Q4 2024

• We recorded no office completions and no office withdrawals over the quarter. There are currently seven projects under construction, totalling 126,000 sqm.
• The largest project under construction is 15 Sydney Avenue (35,000 sqm), which is scheduled for completion in Q4 2025. The asset is fully pre-committed by the Australian Taxation Office (ATO).

Prime yields remain unchanged over the quarter

• Prime net effective rents decreased 1.5% over the quarter and have increased by 2.5% over the past year. Quarterly effective rent growth was driven by an uplift in face rents. Secondary net effective rents decreased by 1.8% over the quarter.
• Prime yields in Canberra remain unchanged over the quarter, ranging between 6.50 and 7.75%. Secondary yields also remained unchanged at 7.75 to 10.50% over Q4 2024.

Outlook: New office completions in Q1 2025 to push vacancy upwards

• It is projected that the vacancy rate in Canberra will trend upwards over the near-term, driven by the completion of 1 City Hill (33,000 sqm). At the time of writing, the project has secured no pre-commitments.
• We believe the trough in prime yields was at the end of 2024. Smaller sub-AUD 100-million assets are expected to continue coming to market, as this is a palatable price point for private investors and boutique funds, which are the most active participants in the market.