SYDNEY: Australia's office vacancy rate hit its highest level in five years in the six months to January and a significant rise in supply this year will likely keep the sector under pressure, the Australian Property Council said.
Data released by the council on Thursday Feb 4 showed that the vacancy rate jumped to 9.3 percent in January, the highest since January 2005, from 8.3 percent in July.
"The Australian economy didn't go into a recession like other countries and neither did the property industry. Nevertheless demand is weak," Property Council CEO Peter Verwer said.
"There is going to be a big spike in supply and that would provide challenges to the property market," Verwer said.
He added that while there was an encouraging sign in tenant demand, it is just 1/20th of the historic average.
In 2010, a total of 968,600 square metre of office space is expected to come onto the market, 760,000 square metre of which will be available in the first half of the year, the biggest addition of stock in one period on record.
Adam Learmonth, director for Anvil Capital, said the pace at which the vacancy increased is slowing due to a pick up in demand in cities such as Brisbane, where coal and gas companies expended their office space.
"Although demand is returning in most markets, we are seeing an increase in supply. I can't see any upward pressure on rents, certainly, not for the next 12 and even to 24 month," he said.
In Sydney's central business district (CBD), empty offices space totalled 8.1 percent in January, the highest since July 2006, and up from 7.8 percent in July 2009. This year, 130,200 square metre of new stock is due to enter the Sydney market of which only 14 percent pre-committed.
Among other major cities, Melbourne's CBD saw its vacancy rate rise to 6.6 percent from 4.8 percent while the Perth CBD vacancy rate edged up to 8.2 percent from 8 percent. - Reuters
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