Dark forecast for Adelaide’s office rental market
Office space in Adelaide is expected to continue to provide low rental returns for investors as an oversupply drags rents down, a new report reveals.
The BIS Shrapnel Adelaide Commercial Property 2014 to 2024 report found that office space in the South Australia capital could deliver yields of as little as three per cent over a five-year period.
BIS Shrapnel senior project manager, Maria Lee, said a number of factors including the closure of the city's Holden plant and Government projects previously slated to be carried out in Adelaide — such as the planned submarine contract — looking set to go elsewhere, would ensure the demand for commercial property was likely to remain low.
"With protracted low economic growth in the state, lagging the national average, the prospects for both employment growth and demand for office space are weak," she said.
"Meanwhile, the supply of office space is growing. Four refurbishment projects will be completed by year end, a 20,500 sqm building is due next year and the new Courts Precinct with associated office space is likely to proceed."
With new office space in the pipeline, BIS Shrapnel predicted that the city's vacancy rate would increase from its current 15-year high of 13.8 per cent to over 15 per cent, which Lee said would force landlords to cut rents and offer leasing incentives.
"We are forecasting an average 16 per cent peak to trough fall in A-grade gross effective rents," she said.
"But we believe we have erred on the side of caution. It could turn out worse."
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