Australia's 'Unprecedented' Office Market

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Australia's central business district office market vacancy rate reached 10.9 percent in June, the highest rate since June 1999, according to the latest figures from Jones Lang LaSalle. 

Five of the six CBD office markets reported double-digit vacancy rates. Brisbane (14.3 percent), Adelaide (12.7 percent) and Canberra (11.6 percent) recorded higher vacancies over the latest quarter. The empty space in Sydney (10.2 percent) and Melbourne (10.0 percent) moved above 10 percent for the first time in the current cycle. Perth recorded a 7.9 percent vacancy rate, the only CBD office market with a vacancy rate below 10 percent.

"There is no precedent for what is occurring in Australian office markets," JLL's head of capital market research, Andrew Ballantyne said in the report. "Investment activity remains robust, while the 2012-13 financial year can be best described as an - annus horribilis for the physical markets."

During the 2012-13 financial year, the country reported a negative net absorption of -191,900 square meters. In comparison, this net absorption was weaker than the -117,800 square meters reported in the 2008-2009 financial year during the global financial crisis. 

Subleasing availability has increased in the financial year, representing 75 percent of the negative net absorption figure, JLL reports.

There is, however a difference between the physical market and investment market in Australia.

Australia's office market reported $12.3 billion worth of office transactions over the 2012-13 financial year with 26 transactions over $100 million, JLL says. However, as vacancies increase, yields are negatively affected.