The Adelaide office market is the most affordable in Australia, and some emerging trends are making it more lucrative for businesses to establish themselves in the city.
After rising for eight consecutive periods, the overall vacancy rate in the Adelaide CBD has now seen a decrease from 19.3% to 17.5% off the back of steady demand and a lack of new supply. In fact, at the end of H1 2024, the CBD recorded its strongest 6-month net absorption in 15 years (29,041 sqm).
Over the next few years, two developments are planned to come online (totalling c. 41,000 sqm), including:
Although there are several muted projects in the pipeline, they are likely to move forward only once pre-commitments are secured.
Adelaide's Prime Net Face rents continued to rise over the past quarter, closing at $485 psqm. This growth is largely driven by new office building completions and asset repositioning. Prime Net Effective rents also increased, supported by higher face rents and a slight reduction in incentives, now around 34.9%.
The Secondary market experienced more modest changes, with gross rents edging up to $335 psqm while Net Effective rents dipped by 0.1%, driven by an increase in average incentives, which now stand at 41.5%.
Adelaide's sublease availability remains relatively steady at 0.5% of total stock. This is due to a number of factors, including:
Leasing activity in Adelaide's new stock has primarily involved existing occupiers upgrading or expanding into higher-quality spaces rather than large-scale corporate relocations from other cities. That means a substantial amount of backfill space is emerging across the market.
With limited large corporate tenants entering the Adelaide market in recent years, landlords may face challenges in backfilling these spaces as new developments come online. For this reason, it's expected that incentives for older buildings, as well as lower-tier A-Grade properties, will increase as landlords strive to fill vacancies.
In line with CBD markets nationally, the flight-to-quality trend remains strong, with high-quality space becoming more affordable and gaining popularity amongst tenants looking to attract and retain talent. Buildings with green star ratings or sustainable initiatives are also experiencing growing demand. In the coming years, flight to quality is expected to remain the primary force behind leasing activity in Adelaide, and backfilling secondary spaces will be challenging.
A large amount of Adelaide's secondary stock requires refurbishment. We are already seeing a rental and absorption divide between new/refurbished and secondary stock. And this gap will only increase over the coming years.
Adelaide’s CBD office market has outpaced other capital cities in terms of rental growth. This performance is largely attributed to a strong post-COVID occupancy recovery and Adelaide's lower cost base compared to other states. Some of the newly completed developments have also set new benchmark rents, further driving rental growth across the market.
Tenant CS is a commercial tenant advisory service that offers tenant representation services in Adelaide. We also cater for businesses across Australia, in cities such as Sydney, Melbourne, Perth, Brisbane and Canberra, but also in regional areas.
We represent you, the tenant, and our in-depth knowledge of the Australian leasing market gives our clients the competitive advantage when it comes to finding a space or negotiating a commercial lease.
So, if you’re on the hunt for tenant representation in Adelaide, book a call with our team today!
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