Canberra office vacancy rate remains low at 8.9 per cent, Property Council report shows

The Property Council of Australia's latest Office Market Report, released on Thursday, revealed Canberra's vacancy rate remains one of the lowest in the country at 8.9 per cent for the six months to January.

It was a slight increase from 8.6 per cent in July.

The vacancy rate is calculated on whether a lease is in place, not whether staff are physically working in an office.

Canberra had the second lowest vacancy rate across the capital cities, coming in after Hobart.

Ross Grove, ACT acting executive director at the Property Council, said a low vacancy rate was a positive sign for the city.

"These results are very pleasing to not only investors but the people of Canberra - a strong office market in any CBD depicts certainty, longevity and survival of a city," he said.

"The Commonwealth employment base and tenancies which continue to be sought in Canberra are no doubt helping drive positive demand for office space.

"It's just so pleasing to see the Canberra market in such a strong position, given the last three years of the pandemic."

The report stated 108,640 square metres of new office space is due to enter the Canberra market in 2023.

Property investment firm ISPT is refurbishing two buildings on Marcus Clarke Street and London Circuit to deliver Pathway Place in stages throughout 2023.

The precinct will offer about 45,000 square metres of office space, more than 40 per cent of which has been leased.

Nicole Ward, general manager, office at ISPT, said an outgoing tenant presented the opportunity to refurbish the properties.

"If we know we've got vacancy coming ... we're always making sure our buildings are remaining current and leading edge in terms of what is being offered and what tenants are wanting," she said.

The buildings will include wellness and end-of-trip facilities, improved sustainability features, while combustible cladding has been removed from the facade.

"The purpose of returning to the office has changed," Ms Ward said.

"It's more around getting people together, building a culture, building strength in the team and their loyalty to who they work with."

Troy Markos, director of advisory and transaction services, office leasing at CBRE, said office requirements for government and private sector tenants are changing, leading to more movements across the capital.

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"Occupier demands are evolving across both the Commonwealth and private sectors driven by a combination of hybrid working, a genuine flight to quality to attract staff back to the office and increased requirements for highly rated [environmental, social, and governance] buildings," he said.

Among the major office moves confirmed for the coming years is the Taxation Office's shift from Civic to Barton in 2025 and the Department of Education and Workplace Relations' London Circuit move in 2026.

Mr Markos said these changes will mean "a wave of supply", particularly in older office buildings, will become available.

"[Property owners are] going to be forced to refurbish and reposition those assets, which is a real opportunity," he said.

"Some of those buildings - it's not all doom and gloom - they have good bones, they can be repurposed, they can still remain relevant and be a more cost-effective option, provided there's the right refurb strategy."

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