Adelaide records 52,700sqm of new office space under construction

The largest project is a 21,700sqm office tower.

There were no completions recorded in Q2 2024, however 150 Grenfell Street is expected to reach practical completion in Q3 2024, according to a JLL report. The building comprises 10,000 sqm of office space and is developed by Kambitsis Group.

There is 52,700 sqm in the supply pipeline currently under construction with the largest asset being a 21,700 sqm office tower. The development is a seven-level office tower built as part of a broader mixed-use residential and retail development.

Here’s more from JLL:

Quarterly net absorption was recorded at 6,718 sqm in Q2 2024 – a decrease from the previous quarter (10,965 sqm). Expansionary activity by large tenant moves in the education & training and construction services were key drivers of this result.

Headline vacancy decreased 0.4 percentage points to 16.6% over Q2 2024. Vacancy levels are still being impacted by the backfill space created by Adelaide’s largest office supply wave in over three decades (101,268 sqm of completions in 2023).

Yields soften in Q2 2024

Average prime net face rents increased 0.6% to AUD 484 per sqm per annum and average prime incentives decreased. However, this, coupled with softening yields resulted in average prime net effective rents decreasing 0.7% to AUD 191 per sqm per annum.

As buyer sentiment and vendor expectations continue to misalign, average prime midpoint yields softened 50 basis points (bps) to 7.75% over the quarter. Over the past 12 months, average prime midpoint yields have softened 125 bps.

Outlook: Occupier demand to fluctuate in the short term

Occupier demand is expected to be driven by opportunistic upgrading of office accommodation, coupled with ongoing centralisation and expansionary activity over the short term.

Prime yields are forecast to tighten to a midpoint of 7.63% by the end of 2024. Investor confidence and assets brought to market are expected to return once broader economic conditions stabilise.

Note: Financial indicators are for the CBD Prime office market, while physical indicators are for the CBD office market (all grades). Data is on an NLA basis.