Hunter Business News

Vote of confidence in Newcastle office market
Solid growth in the demand for new office space in the Newcastle CBD has seen vacancy levels drop over the past 12 months, according to Property Council of Australia’s latest Office Market Report.

Sound demand for space saw office vacancy levels falling from 7.0 to 6.0% over the 12 months to January 2008. Demand for office space (i.e. net absorption, or the amount of new office space occupied) was 3,510 m2 over the year, driven by tenants moving into A Grade buildings.

During the year, 13,900 m2 of new office space was added to the CBD, which was more than double the amount of space added in the previous year. The Property Council’s Hunter Chair, Mr Bob Hawes, said the research showed that Newcastle’s office market was continuing to experience excellent growth with new quality A-Grade space leading the way.

“The addition of 13,900 m2 of space to the market is the second biggest addition on record for the Newcastle CBD,” Mr Hawes said. “With an extra 18,927 m2 of new office space due to hit the Newcastle market in 2008 and a further 2,200m2 in 2009, the total market will grow by another 9.6%."

“This substantial growth signals a huge vote of confidence by businesses in the Hunter Region. Newcastle is the largest regional CBD in NSW and looks set to continue to outstrip other regional CBDs for quite some time to come,” he said.

 “The CBD’s A and B grades are no doubt the main attraction. A and B Grade vacancy are at a healthy 2.4% and 3.9% respectively, and are lower than the corresponding national non-CBD vacancy” Mr Hawes said.

“On the flipside, C and D grades space both have high vacancies of 10.2% and 13.4% respectively which is far higher than the national non-CBD figures. The continued rise in vacancy in C and D grades is not unexpected and points to the trend of business tenants leaving to move into higher grade and newer buildings,” Mr Hawes said.

“Newcastle’s higher grade office markets are experiencing very tight vacancy rates at the moment and look set to remain this way in coming years,” Mr Hawes continued, “It’s the lower grade office stock which continues to feel the strain as tenants continue to trade up into newer space.”

Although business spending on equipment was also strong, business confidence fell in the fourth quarter of last year. It is likely that the volatile stock market, rising interest rates and uncertainty over the US economy may curtail spending in the new year and put paid to the prospect of a continuing recovery suggested by the Hunter leading index. It appears that the Hunter economy will need to rely on continued strong consumer spending in 2008.

Mr Broad said both bids proposed to develop up to 65 ha of the site for a range of general industrial and freight uses, consistent with the Master Plan developed for the site. “It is pleasing to see that the bids are proposing to bring a diverse range of freight, rail and general industry on to the site,” Mr Broad said.

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