Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Canberra Times
The Canberra Times
Lucinda Garbutt-Young

Canberra offices sit vacant as 'better uses' are out of reach

Dozens of old offices across the CBD are sitting vacant or only partially tenanted, experts say, caught in a cycle where owners can not make adequate upgrades.

Several say the offices could be better used, but territory lease laws and development expenses made this a challenge.

There was a 7.9 per cent vacancy rate in prime grade Canberra CBD during the second half of 2023, according to Colliers data.

That was a slight rise from seven per cent at the same time the year prior.

Secondary grade offices - which are well maintained yet older buildings - saw a slight decrease in vacancy rates, from 9.6 per cent to 9.1 per cent over the same period.

Vacant offices on Barry Drive. Picture by Lucinda Garbutt-Young

But Civium Property Group's director of commercial sales Andrew Smith said the tightening of secondary grade vacancies was not necessarily an indication of increased demand for older offices.

Instead, owners of older, or relatively small, Canberra buildings were having to work "smarter" and offer incentives to attract tenants.

"For smaller tenants the high proportions of people working from home and the requirement to not always have a specific office space has meant it has taken longer to lease out offices," Mr Smith.

"The owners need to make decisions of whether they discount rent or offer other incentives, like potentially doing custom fit-outs to lure people into the spaces."

The vacancy numbers for secondary grade buildings are still above what they were prior to COVID-19.

Those who struggle to find tenants now face a decision: spending large amounts of money on upgrades, selling in a subdued market, or sitting on untenanted properties.

Unlike larger commercial office spaces, many of the one and two-storey office buildings across the CBD are owned by small businesses or individuals.

"The sale prices have only been holding steady at best, if not decreasing slightly [since COVID-19]," Mr Smith said.

Developers and owners were essentially "land banking" old office buildings as a result, Colliers' national director for office leasing Aaron Bruce said.

"When you look at some of that old stock, it is never going to make financial sense or be viable to put [end of trip facilities, energy upgrades and a concierge] into some of those older buildings," he said.

There have been calls in recent years for underused office buildings to be turned into public or affordable housing.

Canberra is home to several examples of repurposed offices, including the Mantra hotel on Northbourne Avenue, Doma's Alexander and Albermarle

But repurposing sites to be fit for use is an extremely expensive endeavour.

Chief executive of Canberra Business Chamber, Greg Harford, said cash flow issues for owners with untenanted properties made it challenging to invest in any upgrades, let alone major redevelopments.

"If you have decreased demand for those older offices, that also has a flow-on affect to neighbouring businesses," he said.

"It is a terrible look for areas and it creates a sense of urban decay."

Mr Bruce said a more feasible solution would be knocking down outdated offices to develop new residential builds, as is happening at Amalgamated Property Group's Anzac Avenue project.

The Crown leases on most smaller office buildings in Canberra's CBD do not allow for these kinds of developments, leading to hefty lease variation charges.

"There could be a need to look out how we incentivise developers [to use these properties best]," Mr Harford said.

"Perhaps from a tax perspective, there could be reduced lease variation charges from the government - they can be a major deterrent to the renewal of sites," he said.

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.