Vacant office space across Canberra has increased following an influx of new supply - with even more premium offices in the pipeline.
According to the Property Council of Australia, Canberra's office vacancy rate - which is calculated on whether a lease is in place - increased from 6.3 per cent to 8.6 per cent for the six months to July.
The increase was due to more than 64,700 square metres of office space coming onto the market.
Meanwhile workers are gradually returning to the office after a lull in June.
Canberra's occupancy rate recovered slightly in July to 61 per cent, up from 53 per cent in June.
The June figures, down from 60 per cent in May, were due to flexible working arrangements and the continued spread of COVID-19 and seasonal illnesses, the Property Council found.
Data from JLL Research also found a rise in office vacancy rates. The firm's quarterly figures showed Canberra's office vacancy was 6.1 per cent in the second quarter of the year, up from 5.5 per cent the previous quarter.
Andrew Balzanelli, head of office leasing, ACT at JLL, said Canberra's office market was resilient given the high proportion of public sector tenants.
However the strong government workforce meant subdued activity around the federal election in May.
"Now that the dust has settled ... we've seen a very strong pick up in inquiries [for office leasing] particularly under 1000 square metres, which should extrapolate to stronger activity in the third quarter to fourth quarter of this year," Mr Balzanelli said.
Adina Cirson, ACT executive director at the Property Council, said despite the increase, Canberra still had the lowest vacancy rate of the capital cities.
"We're pretty happy with how we're tracking in terms of office vacancy and the strength of the Commonwealth sector is really heartening," she said.
'Flight to quality' as premium office space fills up
The majority of the new offices added to the Canberra market in the first half of the year was premium space.
Vacancy across A-grade office space was 6.6 per cent (up by 2.4 points) due to 63,450 square metres of supply additions.
Troy Markos, director of office leasing, ACT at CBRE, said organisations are willing to pay a premium for top-tier office space.
"There has been a noticeable flight to quality with occupiers seeking space that will help them attract staff back to the office or assist in the war for talent, which is their main struggle right now," he said.
"This has aided the increase in face rents, as we have seen occupiers are happy to pay more for the right space, but they are expecting more from the buildings they are choosing, namely bookable shared meeting rooms and flexible parking arrangements."
More in the pipeline
More than 52,000 square metres of new office space is expected to come onto the market in the second half of 2022, according to the Property Council.
Almost 38,000 square metres of new office space is estimated for Canberra in 2023, plus another 13,000 square metres from 2024 onwards.
Upcoming offices include Capital Airport Group's 6 Brindabella Circuit, slated for completion this year, and Morris Property Group's One City Hill development, to be delivered in 2023.
Refurbishments at ISPT's Pathway Place and Willemsen Group's 5 Farrell Place City are also due to be completed this year.
Mr Balzanelli said he expected the new stock to be absorbed quickly, which would see vacancy rates remain stable over the next 12 to 18 months.
"We expect vacancies might even increase slightly as a result of further new stock hitting the market - some backfill opportunities - but good-quality, A-grade stock is still fairly limited," he said.
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