Strengthening economies and a lack of new buildings has reduced the amount of empty office space around Australia for the second year in a row, according to new figures.
Led by the two biggest markets of Sydney and Melbourne where vacancy is now well under long-term averages, technology and finance companies as well as infrastructure-related outfits have helped Sydney and Melbourne along to a vacancy rate of just 4.6 per cent according to the latest Property Council of Australia (PCA) report.
Overall the national vacancy fell from 10.2 per cent to 9.6 per cent in the six months to January 2018. Vacancy dropped in 75 per cent of the 26 individual markets covered by the PCA.
According to the report, Australia's tightening office markets provide a window into a strengthening economy and these results were certainly encouraging.
The report explained that Melbourne's result had been driven by a surge in tenant demand while the withdrawal of buildings for future redevelopment and the new metro line were the key for Sydney.
Sydney and Melbourne account for more than half of all CBD office space in Australia.
The vacancy in Sydney's office market could reach as low as 3.4 per cent as the supply of new office space tracks under the historical average for another two years.
Sydney, Australia's largest office market, has seen its vacancy rate drop to 4.6 per cent from 5.8 per cent but that movement is mostly as the result of space being withdrawn for refurbishment or redevelopment.
According to industry experts, in Sydney, over 100,000 square metres of withdrawals during a year of no new supply contributed to the substantial decline in vacancy in 2017.
PCA figures have shown that 2017’s rapidly tightening market resulted in office vacancy in the popular office precinct of St Kilda Rd fell by four percentage points, the most of any market in Australia, to 7.2 per cent.
Vacancy in the Melbourne CBD itself has fallen from 5.9 per cent to 4.6 per cent over the six months to January 2018. East Melbourne, another fringe market, boasts the lowest vacancy in the country at 2.5 per cent.
Figures showed Melbourne had experienced the largest drop among Australian CBDs and now boasts the equal-lowest vacancy rate among all of the CBDs.