Canberra's office market likely to outperform other cities: forecast

A shift to working from home and rising unemployment will particularly have an impact in the Sydney and Melbourne markets.

But Canberra's office leasing market could outperform other capital cities due to the concentration of government offices, Knight Frank has forecast.

Knight Frank chief economist Ben Burston said while Canberra would fare well comparatively there would not be strong growth.

"We are not saying we expect strong growth in Canberra by any means we're just saying a period where we are likely to see property values declining on average we would expect Canberra to fare relatively well," he said.

Mr Burston said while investors had previously looked at growth potential there would be a shift to income security, which he said Canberra would benefit from.

While a shift to working from home is predicted as a consequence from the pandemic, Mr Burston said this trend would not be as prominent as other cities as Canberra was a small city and did not have traffic congestion issues.

"As a smaller city with much shorter average commute times to and from work, I don't think there will be the same level of urgency from employees [to work from home]," he said.

Public service cuts could prove a downside to the forecast, Mr Burston said.

"You can never entirely rule out government cuts because government policy can change," he said.

"But there has been that desire from government to contain the level of growth in employment in government for some time. It's unlikely the government would think there is a huge scope to make those cuts."

ACT and Commonwealth governments had sought to consolidate and upgrade workplaces, Colliers International state chief executive Paul Powderly said.

"This year we have seen a spike in leasing briefs and there is approximately 180,000 square metres of accommodation requirements in or coming to the market," Mr Powderly said.

"This is a mixture of growth and renewal but will deliver much needed stimulus to the construction sector."

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But Knight Frank head of agency ACT Daniel McGrath said he expected construction of office blocks to plateau, with new builds only occurring if a tenant had been secured.

"We've seen quite significant additions to stock through City Quarter and Constitution Place they are really significant developments the market can handle really over a 10-year cycle," he said.

"So I do think it will plateau and developments will not be on a speculative basis they will be on a pre-commitment basis only."

The Australian Tax Office recently invited commercial property owners to express interest in providing offices for the department's Canberra headquarters.

The ATO is after about 32,000 square metres of space and would prefer a single building. The offices are currently across two buildings in Civic.

As well, the Department of Agriculture is set to move into a new office building in Canberra's city centre - Amalgamated Property Group's Civic Quarter 2 in a move that will cost $78 million.

Department of Defence also eyed off new offices last year with about 65,000 square metres of space needed.

Capital Property Group's Constitution Place is expected to complete construction this year and it would have a five-storey building leased to the ACT government.

It came as Doma Group handed over the office component of its redevelopment of the Dickson Motor Registry over to the ACT government.

The territory government would occupy 13,200 square metres of space at the building and an Access Canberra would be housed at the site.

The building would be one of Canberra's first zero emissions office block.

"At the request of the ACT government, the building has been designed to source its heating, cooling and ventilation needs from 100 per cent renewable electricity and not burn natural gas like traditional Canberra designs," DOMA general manager of development Gavin Edgar said.