Adelaide's fringe office vacancy rates increase, but older buildings a concern
Adelaide’s ageing city fringe office stock continues to record high vacancy rates as employers look to the CBD and newer developments in the city’s west and north to attract and retain workers.
Fringe vacancy rates increased from 11 per cent to 12.6 per cent in the six months to January 2019, and net absorption fell by 2000 square metres, continuing a five-year trend.
JLL managing director Jamie Guerra said many buildings in traditional fringe areas, including Fullarton and Greenhill roads, needed major upgrades.
“Many of those buildings are reaching the end of their economic life and do not meet standards required when it comes to access and technology,” he said. “Due to tighter ratios they may not offer the same value when it comes to on-site parking.”
Mr Guerra said emerging defence and technology precinct Mawson Lakes in the city’s north presented good opportunity for investment and was experiencing growth, including the establishment of the $50 million Raytheon Australia Centre for Joint Integration announced in March.
“We’re seeing a lot of activity due to proximity to the university [Uni SA campus] and the Outer Harbor defence precinct, and with amenities including a supermarket and cafes, and a train station, I think this is a location we will see continue to develop.”
Zoning changes as part of the state government’s Inner Rim policy meant owners were choosing to transition buildings to low-medium density residential apartments in city fringe areas including Kent Town in the east, Prospect Road in the north and parts of the Anzac Highway.
Investment in major infrastructure upgrades, including the $252 million north-south corridor upgrade, would continue to drive investment in suburban and outer markets.
Savills office leasing director Adam Hartley said several high profile tenants, including Beach Energy and BAE Systems, had chosen to relocate from the fringe to the CBD, seeking upgrades to office environments.
However, he said there was still demand for refurbished heritage buildings that retained character. One example was 202 Hutt Street, refurbished by Antunes Group before being leased to an accounting firm at an above-market rate of about $450 a square metre.
“We’re also seeing that there is demand among smaller tenants for fully furnished offices allowing for faster relocations.”
Knight Frank director of office leasing Andrew Ingleton said there was growing demand for non-CBD locations where technology was available to support business.
“While the traditional fringe office market has been heavily favoured by investors, many tenants are frustrated by the lack of commercial parking stations, clearways, absence of cafes and ageing office stock,” Mr Ingleton said. “The inner western suburbs of Adelaide have developed into an attractive location, as heavy industry is gradually squeezed out and replaced with medium density residential development and corporate office developments.”
