The biggest property boom in Canberra's history has come to an end, with dramatic falls in commercial building approval rates and high vacancy rates indicating the city is at the end of its development cycle, experts say.
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"We’ve come off the back of the most significant property boom in Canberra’s history, largely driven by Commonwealth government requirements for new office accommodation," ACT executive director of the ACT Property Council, Catherine Carter, said. "We’ve come to the end of that boom."
Ms Carter said Canberra had the third largest amount of office space – 2½ million square metres – among cities, a quarter of which was constructed in the past five years.
"Most other Australian capitals had a dip in construction during the GFC, whereas Canberra continued to grow," she said. "Now we see a lot of confidence in other state markets, but we’re in a downturn."
Collier's director of investment sales and office leasing, Tim Mutton, also said Canberra is "nearing the end" of its development cycle.
"There is thin demand in the office market at the moment from tenants and that is partially because of the political environment and also because of where the economy is up to at the moment," Mr Mutton said.
The long leases of many Canberra commercial tenants were also slowing the market, he said.
The Canberra Times reported recently that the Australian Tax Office was still paying rent on at least 4185 empty desks, 637 of which were in Canberra.
Some developers are understood to be waiting for lease commitments before considering construction while their plans remain at the development application stage.
"Developers, given they know these conditions, and it's visible to everyone in the market, they’re reluctant to commence new building since it might be two or three years before they see an uplift in demand," Mr Mutton said.
There are currently just two new commercial developments under construction according to the Property Council's January office market report, with six others still in the development application stage.
A year-on-year comparison from the Bureau of Statistics shows the value of non-residential building approvals in the ACT dropped most dramatically from $1.036 billion in 2010-11 to just $713.3 million in 2011-12, before dropping further in 2012-13 to $682.8 million.
Last financial year's figures, only available up to May 2014, continue the downward trend.
This is combined with high office vacancies – the rate was 12.9 per cent in January, according to the Property Council of Australia, compared to 10.4 per cent in the Australian market overall.
Ms Carter believed the market would recover in a few years, and sided with those making comparisons to the eventual recovery from the cuts made to the public service in the 1996 budget. "We got through that period, and we will get through this period," she said.
