Secondary grade office outperforms prime in Adelaide

ADELAIDE, 18 September 2023 – 79 Angas Street, a remarkable fully refurbished heritage property, has recently sealed a five-year lease agreement with Village Gate, underscoring the robust demand for office spaces in Adelaide's secondary-grade market.

JLL’s Office Leasing Executive, Catherine Silverlock said, “The leasing success of this property exemplifies the prevailing flight to quality trend in Adelaide's office market. The building's exceptional refurbishment, coupled with its distinctive heritage features, has set a new standard by becoming one of the most rapidly leased properties in recent times."

Village Gate has committed to 179 sqm of fully refurbished office space, spread across two levels at 79 Angas Street.

Mrs Silverlock said, “79 Angas Street emphasises the thriving demand for secondary-grade office spaces in Adelaide, underscoring the importance for landlords to invest in refurbishment and repurposing their CBD assets to cater to the evolving needs of occupiers.”

For the first time in over a decade, the secondary-grade vacancy rate in the Adelaide CBD office market is sharper than the prime-grade vacancy rate. The trend has now persisted for three consecutive quarters.

Recent data from JLL Research supports the high demand for secondary-grade office spaces in Adelaide's CBD. The data reveals a significant surge in demand, with a secondary vacancy rate of 14.2%, surpassing the prime vacancy rate by 4.2 percentage points. Currently, the prime vacancy rate stands at 18.4%, the highest recorded since 1993.

In contrast, the secondary vacancy rate hit its lowest point since 2012. This outcome is essentially the result of a combination of occupiers seizing opportunities to move from lower-quality space to higher-quality B-grade space, as well as a trend of occupier centralisation from suburban office markets.

According to Silverlock, several factors contribute to the increased demand for secondary-grade spaces. "Businesses are actively opting for higher-quality B-grade spaces over lower-quality alternatives. Additionally, there is a noticeable trend of occupiers centralizing their operations from suburban locations to take advantage of the amenities, services, convenience, and transportation options available in prime central locations."

Adam Ross, Director of Village Gate, highlighted the significance of finding an inspiring space for their brand and stated, "As an agency focused on visual and experiential branding, having a space that inspires staff and clients is integral to our culture and the exciting journey of our brand. The exceptional refurbishment and tasteful design of 79 Angas Street captivated us. The open-plan layout and abundance of natural light perfectly matched our requirements, making it an ideal choice for our expanding business."

The property landlord expressed delight in the remarkable leasing success following the refurbishment, acknowledging the valuable role played by the right real estate partner in seamlessly matching the space with the perfect tenant. The landlord also expressed great pride in the new tenants' profound creative appreciation of the property.

Looking ahead, JLL Research predicts a positive outlook for the Adelaide CBD office market, with net absorption projected to reach its strongest level in 15 years, totaling 30,000 square meters in 2023. Deloitte Access Economics also supports this positive forecast, predicting a 2.1% increase in white-collar employment growth, amounting to approximately 1,400 workers.