Demand for office space in the ACT is still falling, despite fewer empty offices across the territory.
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According to the Property Council of Australia’s latest office market report, that's because a number of properties have been withdrawn, decreasing the amount of space on the market.
Executive director Adina Cirson said there was anecdotal evidence increasing commercial rates were putting interstate investors off doing business in the ACT, saying it was time for tax rates to be revisited.
"I'm getting quite a bit of feedback from my members that commercial rates are hurting and people are making the decision not to lease office space because of commercial rates," she said.
"The vacancy rate has come down which is a good thing but it hasn't come down because the market is hot, it's because that space has been taken out of the mix.
"Certainly if there's a flattening in vacancy rates we need to look at the reasons for that.
"Commercial rates have substantially increased, if they're seen as too steep investors will choose to do business in other towns."
But Ms Cirson said the commercial leasing sector remained confident that demand for office space would increase now that the Commonwealth - which represents more than 50 per cent of the market in the ACT – was getting on with new whole-of-government leasing arrangements.
According to the report, in the six months to July, Canberra's overall vacancy rate dropped slightly from 13.2 per cent to 12.5 per cent, still slightly higher than the vacancy rates 12 months ago at 11.6 per cent.
The report found Canberra's vacancy rate sat fourth highest after Perth, Adelaide and Brisbane.
Ms Cirson said the reduced vacancy was solely due to the withdrawal of property from the market, with 65,368 square metres less available.
"The Australian vacancy rate sits at 9.1 per cent, and we remain well above the optimal vacancy rate of 6 per cent,” she said.
Across the entire market, some refurbished stock has become available which could place pressure on owners to increase incentives to tenants.
“Whilst there is clearly a demand for smaller, premium office product, overall we are seeing a bit more of a holding pattern in demand," Ms Cirson said.
"This potentially is due to the federal government’s change in procurement processes for office space to a whole of government approach, which has seen a slow-down in inquiries over the last nine
months in particular.
“That said, business sentiment is strong, and we expect an increase in office demand over the medium term as whole of government processes are bedded down – particularly amongst businesses seeking
outsourcing opportunities with the Commonwealth."
