Canberra's office vacancy rate is at its lowest level in seven years but one in 10 offices in the territory are still unoccupied.
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The national capital's vacancy rate dropped from 11.1 per cent to 10.3 per cent over six months, the latest Office Market Report by the Property Council of Australia showed.
The rate has been steadily declining over the past two years, which highlighted a continued tightening in the market according to ACT Property Council executive director Adina Cirson.
A-grade office space vacancy remained steady over the past six months at 6.9 per cent.
C-grade offices had a vacancy rate of 16.1 per cent and D-grade was 14.7 per cent. It was the lowest level for both grades since 2007 and 2010 respectively.
However, it was B-grade office space that drove the decline with the vacancy rate of 12.3 per cent down from 14.1 per cent in July 2019.
The vacancy rate in Civic remained higher than the capital's average at 12 per cent. In the non-Civic market the vacancy rate was 9.6 per cent.
Barton had a vacancy rate of just 6.9 per cent.
Ms Cirson said vacancy rates were boosted by the fact the Canberra market had shrunk since 2015.
"Withdrawal of stock also clearly helps our vacancy rates, meaning the market is primed to realise adaptive re-use opportunities in the C- and D-grade stock, with a positive trend of refurbished stock entering the market," she said.
More than 50 per cent of Canberra's office space is tenanted by the Commonwealth and Ms Cirson said this would be key to performance in 2020.
"The market is keenly watching the impact of the Prime Minister's most wide reaching machinery of government changes in recent years, with the change up and running from last weekend - placing the Commonwealth tenancies on the market watch list this year," she said.
Almost 80,000 square metres of new office space is due in the ACT market in 2020.
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JLL ACT managing director Andrew Balzanelli said the market was set for a strong year.
"2020 is set to be a promising year for demand, with a number of key public sector deals expected to drive positive net absorption over the next 12 months," he said.
"The strong levels for pre-commitment activity recorded in recent times will drive down prime grade vacancy as this new supply reaches the market. The three commercial development under construction in the Canberra market are now 99 per cent pre-committed."
Amalgamated Property Group's Civic Quarter, on Northbourne Avenue, was given as a reason for Canberra's performance by CBRE Canberra state director of office leasing Zoe Ferrari.
"The completion of Civic Quarter stage one in the city and a move by landlords to reposition secondary stock helped drive prime rental growth in the Canberra market," she said.
"With the majority of new supply in Canberra pre-committed, vacancy rates are forecast to remain low this year, particularly in the prime sector."