The Wollongong office market will experience two years of consolidation before the city's big build kicks off, according to an office market report from Colliers Wollongong.
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After a number of A-grade office buildings were completed in the previous years, including Lang's Corner, the Gateway Building on Keira Street and the IMB Bank tower, the region's market was flooded with addition, high-value office floorspace.
While this had meant that vacancy rates were high as new supply was added, absorption rates continued at a steady pace, as existing Illawarra businesses relocated to new digs and new businesses moved to the region.
In 2023, Wollongong added an additional 11,500 square metres of office space, and 7304 square metres became vacant. Just under 10,000 square metres was leased during the year, leaving 32,287 metres vacant at the end of the year.
However, according to Colliers Wollongong associate director Kady Leggett, were it not for the additional space added in the past few years, Wollongong's offices would be full.
"Without the new stock, which equates to around 30,000 square metres, we would potentially be heading into 2024 fully leased," she said.
As seen in previous years, the flight to quality office space in Wollongong continued, with strong demand for top-tier office space as employers seek to lure workers back to the office after two years working from home.
But a trend that also emerged in 2023 was the strong demand for cheaper C-grade office space, particularly at the smaller end of the market.
"This suggests a high demand for compact and cost-effective spaces," Ms Leggett said.
With no major new offices expected to come online in 2024 and 2025, the next two years were going to be ones of consolidation, as existing Illawarra businesses upgraded and the Wollongong CBD continued to attract new businesses from outside the region.
In 2023, more than a third of all office market transactions were from businesses new to the Illawarra, a trend expected to continue.
"Overall vacancy would decrease by around 5000 square metres until the new stock hits the market," Ms Leggett said.
That's expected to occur from 2026, as a number of office towers in the pipeline near completion.
First off the list is Lang's Corner #2, an 11-storey office tower to the rear of Kembla Chambers in lower Crown Street Mall.
The project, known as Triple One Crown, was approved by the Southern Region Planning Panel in 2020 and will add nearly 10,000 square metres of floorspace to the market.
At the other end of the mall, WIN Grand's commercial component, approved in February this year, will also add thousands of square metres of office space.
As well as these two developments, the demolition of the Downtown Motel and Amari Bar - formerly Ron De Vue - will open the way for the addition of nearly 12,000 square metres of office space.
"The timing of these projects are likely to be in 2026 and beyond," Ms Leggett said, "with no substantial new stock in 2024 and 2025."
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