Office leasing activity increases in Adelaide: Savills
In the 12 months to September 2016, Savills' latest quarterly report identified approximately 137,100 square metres of leasing activity in the central Adelaide office market, including Adelaide CBD and fringe areas.
This an increase on activity levels 12 months prior and above the five year average of approximately 97,500 square metres.
The majority of these leases (approximately 80% of the volume identified leased) were in the Adelaide core precinct.
Some 70% the deals reported in the 12 months to September 2016 period were new tenants, while 30% were renewals and sub-lease deals.
Of the 137,100 square metres identified leased in central Adelaide in the 12 months to September 2016, the government and community sector dominated activity by volume of space leased.
However, the property and business services sector had the greatest number of transactions.
A selection of recent leasing transactions is displayed in the tables below.
Savills’ Adelaide Lease Expiry Report analyses a database of lettable floor space in the CBD and fringe office markets. As at the September 2016 report, it is estimated that an average of 115,000 square metres of leased space in the CBD will come up for renewal each year for the next three years.
Around 43% of this space is leased by the government and community sector, one of Adelaide’s largest occupiers, however, the finance and insurance and the property and business services sectors combined have a similar amount of space coming up for renewal.
In the short-term there is likely to be ongoing demand from tenants seeking to rationalise existing space, as well as from those seeking expand or upgrade into new space.
The state and federal government have been significant takers of space during the last quarter.
Traditionally one of the largest occupiers in Adelaide, the recent deals by government occupiers during the last three months were a combination of new transactions and renewals.
In August 2016, Country Health SA (state government) renewed their lease for two floors in 22 King William Street, adding a part floor as expansion space in the process. The National Centre for Vocational Education Research (NCVER) leased two floors in 60 Light Square, which became vacant after People’s Choice Credit Union (PCCU) relocated to their newly completed building in 50 Flinders Street.
Another state government department leased a full floor in 60 Light Square in June. In addition, following the sale of the buildings in the State Administration Precinct portfolio in September, the government occupied buildings are subject to new 12-year leases.
In June 2016, UK firm, Babcock International, together with the state government, announced Babcock would be moving their regional headquarters to Adelaide.
The state government has provided a multi-million dollar incentive to the firm for the relocation, including incentive payment towards the fitout of their new Adelaide office, which will be based in 70 Franklin Street.
Botten Levinson Lawyers has moved into level one of the old Darling Building on Franklin Street, following its refurbishment by a syndicate group led by Williams Burton Leopardi.
Williams Burton Leopardi relocated to the top floor in May. The syndicate purchased the building in 2013 for $1.05 million and undertook a complete refurbishment.
Other deals of note, include Bank of China leasing part level 8 in 1 King William Street plus the ground floor for their retail outlet.
Fyfe has relocated one of their Core located offices on Flinders Street to Viterra’s old building at 124-130 South Terrace in the Frame.
Hudson has relocated from 75 Hindmarsh Square to 101 Pirie Street, rationalising about 500 square metres in the move.
Morgan Stanley has also relocated, moving from 115 Grenfell Street to 2 King William Street recently, although only reduced space requirements by about 100 square metres.
As at September 2016, net face rents in Adelaide CBD typically range from $395 to $460 per square metre per annum for premium grade, $330 to $410 per square metre per annum for A Grade and $265 to $335 per square metre per annum for B Grade.
In Adelaide’s fringe, as at September 2016, net face rents typically range from $330 to $355 per square metre per annum for A Grade and $270 to $300 per square metre for B Grade.
Although incentives had shown signs of stabilising earlier this year, over the last quarter they have increased to above 26% or in some cases, higher, in CBD prime space, resulting in a slight drop in net effective rents over the last three months.
