May Commercial Month in Review - Darwin

The Darwin CBD office vacancy rate in January 2024 (the latest Property Council estimate) stood at 14.4 per cent. The net absorption for the 12 months to January 2024 was -3664 square metres.

However, it is important to note that the vacancy rate for A grade and Premium space is significantly lower than the overall vacancy rate. A prospective tenant would have difficulty locating say 1000 square metres of quality space within the CBD itself. Consequently, in recent months, we have seen rents reach rates as high as $750 per square metre per annum (gross) in Darwin’s premier office buildings.

On the other hand, lower B grade and C grade space is very difficult to lease in the current market without significant investment and upgrade. It is therefore natural to expect that owners will look to upgrade their existing buildings to a higher standard rather than have them vacant. However, we have only seen this occurring to a very limited extent across the CBD and certainly there are no new projects currently being undertaken.

The main reason remains cost. The conversion of an older building to a higher standard remains prohibitive in most cases. Secondly, unless a significant pre-commitment to lease is made, the risk profile of this type of expense is, understandably, well above the appetite of almost all owners.

Unless the NT Government, which is the dominant tenant in the CBD office market, or possibly the Commonwealth Government, steps up with a lease requirement, any project is unlikely to proceed. Private businesses in Darwin simply do not have the space requirements to justify an entire new building.

We are aware of at least three development proposals which could be activated if these requirements are met. Until rents reach even higher levels or a significant pre-commitment is made, these proposals are unlikely to proceed.

To read the full Month in Review for May, Click Here