Vacancy rates still high

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THE  vacancy rate in Canberra decreased slightly over the six months to July 2011, from 13.4 per cent to 13.3 per cent, according to the Property Council of Australia’s “Office Market Report”.

The result was due to above-average demand. The market’s upper grades of space posted vacancy increases, while the lower grades posted vacancy decreases. With the exception of B Grade, all grades remain in double-digit territory for vacancy.

Canberra continues to have the highest office market vacancy rate of any capital city. Sydney’s CBD is the closest in vacancy, at 9.3 per cent.

Canberra Civic’s vacancy rate decreased from 15.5 per cent to 14.2 per cent over the period, due to demand of 12,010 sqm. It is the highest since January 2008. Supply additions totalled 3,902sqm over the half-year.

Vacancy in the non-Civic market increased from 12.5 per cent to 12.9 per cent. Demand couldn’t keep pace with supply over the period: net absorption was 15,534sqm, compared to supply of 31,864sqm.

Property Council of Australia ACT executive director, Catherine Carter, says: “There has been some movement within the different grades of space in the Canberra office market.

“Notably, vacancy increased across the A and B Grade segments due to supply additions, while the lower grades posted vacancy decreases due to increased demand and withdrawal of stock.”

“Overall vacancy has decreased slightly, despite 35,766sqm of supply additions into the market.”

“In general terms, demand for office space is subdued at present as a result of Commonwealth Government budgetary restraints, which all commentators know is the driving force for economic activity in the Territory.”

“Coupled with the lack of demand from the Commonwealth, the Canberra property industry has also been hit with a number of other significant challenges presented by the ACT Government, mainly through excessive taxation and charges.”

“These include the new Lease Variation Charge which came into effect on 1 July,  the draconian fees and charges associated with failing to comply with lease building commence and complete provisions, the extraordinarily high levels of stamp duty, and substantially increased development application fees which have been recently announced.”

“Added into the mix will be the addition into the market caused by the ACT Government’s announced intention of building a major 53,000sqm office development in Civic.”

“All of these factors have led to a situation where the buoyancy in the market of the past decade will no longer apply in the short-to-medium-term without dramatic policy changes by government.”

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