Office Occupancy Doubles as Appetite Grows

Major A-Grade office transactions are under way as occupancy rates start to finally recover, with all Australian cities nearing the 50 per cent mark after a six-month hiatus. 

Rates in Melbourne, Sydney and Canberra doubled in March, according to the latest Property Council of Australia report.

Brisbane occupancy also made solid gains for the month, however, Perth rates were on the way down as Covid continued to spread in the west.

Adelaide recorded the highest occupancy in the country, at 61 per cent, and had been one of the most consistent performers during the past year.

The solid market performance reflects the growing A-grade office market in the city including the recently repositioned Chesser House by MPH architects.

Cromwell Property Group purchased the high-profile office tower for $81.35 million from Harmony Property Investments and Arc Equity Partners.

The building, with a net lettable area of 11,161.6sq m over 11 levels, had a weighted average lease expiry of 6.1 years and was sold on a passing yield of 5.12 per cent and a core capitalisation rate of 5.5 per cent.

Australian office occupancy results

^{^Source: Property Council of Australia}

The 100 per cent freehold interest in Chesser House at 95 Grenfell Street in central Adelaide was negotiated by by Knight Frank’s Guy Bennett and Colliers’ Paul Van Reesema and Alistair Mackie.

“Surrounded by the activation and significant refurbishment of older stock and new developments, Chesser House is at the heart of the resurgence of the Adelaide CBD,” Van Reesema said.

“Nearby notable developments include the recently built Rundle Place and Bendigo Bank, as well as the coming 30,000sq m office building at 83 Pirie Street and the 40,000sq m mixed-used development at 60 King William Street.

“Both projects are largely pre-committed to by state and commonwealth government occupiers, continuing the support of strong occupancy and high underlying capital growth into the future.” 

PCA chief executive Ken Morrison said the data was very encouraging.

He said cities’ occupancy varied from day to day, peaking, for example, in Adelaide at 72 per cent and dropping to 49 per cent on a low day. 

“It's heartening that people are returning to the office in such numbers, particularly given considerable weather events on the east coast and the continuing isolation impacts of the pandemic," Morrison said.

“To see office occupancy rates double in some of our major CBDs is especially pleasing and bodes well for further recovery in the months ahead.

“While most businesses are encouraging some flexible working arrangements with their staff, there are huge benefits in personal connection and it’s good to see these being embraced once again.” 

Rent s also varied markedly between cities, with Melbourne increasing at the fastest pace in the country due to quality stock coming online.