The premium office space market in Australia is beginning to realise that its bias towards eastern seaboard CBDs is a less-than-winning proposition.
For those looking to invest in, or find a winning combination of, the best office space in the best location for business, all at the right price, Adelaide is shaping up as the winner.
Colliers, a respected operator in commercial real estate markets across Australia, says Adelaide is proving to be good value for CBD office space for many sound reasons, not the least being price. And investors are starting to sit up and take notice. “There’s a huge amount of capital that’s looking to be invested – 2020 was a record year for investment in the office asset class in Adelaide, with $1.2 billion of assets transacted here,” says Kate Gray, Colliers director of research. “Adelaide is safe, and its yield is generally higher than the eastern seaboard.
“A lot of investors have been priced out of Sydney or Melbourne and are now looking more broadly ... they can’t get the assets so are now looking more broadly. That’s actually benefited smaller markets like Adelaide.”
For those looking for office space to lease, Colliers’ report on capital city CBD office leasing market indicators for 2021 Quarter 3 shows the average annual cost for premium and A-grade space in Adelaide is close to half of that charged in the eastern states. Figures from other sources, including office rental site Rubberdesk, confirm tenants in eastern seaboard capitals are paying far higher prices. In addition, incentives – such as a contribution to a new office fit-out or a rental rebate – are currently very high in the Adelaide market.
But it is not simply price that attracts. “We’ve got strong advantages around life sciences and the tech space, and the fact we are a university town with 3 world-class universities,” Gray says.
Another advantage is Adelaide’s smaller scale, helping to make it the world’s third most liveable city and also making for easier cross-fertilisation of ideas and innovation. “Everyone knows everyone, so that allows us to lead innovation,” Gray says.
She points to the arrival of global management consulting and technology services firm Accenture and Google as a likely indicator of increased demand for Adelaide office space, as well as the increased business start-up activity, particularly at innovation hub Lot Fourteen adjacent the city’s parklands. “There’s a lot of focus on Lot Fourteen but there will be a spill-over effect for the rest of the city,” Gray says. “Eventually, Lot Fourteen is going to be oversubscribed and Adelaide then will be the innovation precinct, not just Lot Fourteen. It’s a great catalyst. We can be the San Diego of life sciences and the Silicon Valley of the tech space.”
In line with this prediction, Ten Gigabit Adelaide, Australia’s first city-wide fibre optic network with symmetrical speeds up to 10Gbps for businesses and organisations in the city, is on offer. Demand is strong for newer quality office spaces that are well fitted out, with new space to come this year and into 2024, including 83 Pirie St, 60 King William St and Walkers’ Festival Tower.
Meanwhile, Adelaide is leading the way in the return to the office post-Covid-19, and payroll data in South Australia is showing strong growth in the sectors most in need of office space, including public administration, education and training and professional, science and technical services. “The Property Council of Australia does an occupancy survey, which shows small cities, including Adelaide, have returned to the office at a greater rate and far quicker than Sydney or Melbourne,” Gray says.
Sourced from The Advertiser’s website: Why Adelaide is the best place to do business