Australia Office Vacancy at 5-Year High, Property Council Says

Feb. 4 (Bloomberg) -- Australia’s office vacancies have reached a five-year high on weak tenant demand and rising supply, the Property Council of Australia said in a report.

Office vacancies rose to 9.3 percent in the six months to the end of January, from 8.3 percent in the previous half, the highest since January 2005, the organization, which represents owners, investors and managers of commercial property, wrote in a report today. Vacancies will rise 1.5 percent to 2 percent in the next 12 months, said David Rees, head of research at Jones Lang LaSalle.

“Although it’s going to rise through early 2010, it won’t be to the sort of levels that might have been feared about 12 months ago,” Rees said in a telephone interview yesterday.

While demand for space is returning as the economic outlook improves, excess supply from Perth and Brisbane, which had high demand during the commodities boom through to 2007, will continue to push vacancy rates higher, Rees said.

Some 19,533 square meters (210,253 square feet) of space was added to Brisbane’s “fringe” office area in the second half of 2009, pushing vacancy rates to 11.3 percent, the highest since January 2004, the Sydney-based Property Council’s report said. Perth fared better, maintaining a vacancy rate of 8.2 percent, under its historical 10 percent rate, it said.

Sydney, the nation’s most populous city, had 8.1 percent of offices lying vacant, a four-year high.

A total of 968,600 square meters of office space will be added to the Australian market this year, Property Council Chief Executive Officer Peter Verwer said in an e-mailed news release.

“The big issue facing the market is continuing weak demand,” he said. “While our research shows an encouraging swing toward positive tenant demand in the past six months, it is just one-twentieth of the historic average.”

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net.