With recent Property Council of Australia data showing the Adelaide CBD has the highest office vacancy rate in the country, the Adelaide Lord Mayor wants home-owners and renters to fill the gap.

Adelaide Lord Mayor Jane Lomax-Smith pitched the idea of converting under-utilised office spaces into residential offerings on Tuesday night at Adelaide Town Hall during a discussion about the council’s housing and homelessness policy.

“Our CBD is struggling because we don’t have enough residents, and so what I think we need to do is actually have [a] pilot survey of a conversion,” she told the chamber.

“We have a lot of building stock that is unusable, unwanted, unsustainable and ugly and empty.

“Let’s find a way at getting heritage conservation, rehabilitating them, and putting people in [them] who can spend money.”

Our sister news site InDaily reported in January an expected economic slowdown would hit Adelaide in the second half of 2023 as the city battled “slowing population growth”.

Recent Property Council of Australia data show office supply vacancy rates have increased in the Adelaide CBD over the past six months by two per cent.

The CBD’s vacancy rate for January 2023 was 16.1 per cent — a jump from 14.2 per cent in July 2022.

The Property Council of Australia said the CBD had record supply, with more stock set to enter the market when both Charter Hall’s 60 King William Street and Walker Corporation’s Festival Tower open later this year.

(Middle) Lord Mayor Jane Lomax-Smith. This picture: Tony Lewis

It also comes as employers adapt to working-from-home arrangements, spurred on by the COVID-19 pandemic.

Lomax-Smith said there was an opportunity to “retrofit” empty offices and provide a subsidy to commercial developers to convert business precincts into residential dwellings.

“It’s really hard to fill those offices,” she said.

“Everyone tells me it’s impossible — but let’s find a low-scale office block that is begging for action and let’s see if we can have a pilot study.

“We’ve hit a point early on in a recession, where it’s getting so expensive to demolish and rebuild, and there might just be an opportunity to flip and do something more innovative.

“We should be in the market for being audacious and innovative.”

City of Adelaide CEO Clare Mockler welcomed the idea of a pilot study.

Mockler said she was recently informed by the State Commission Assessment Panel that for the first time in nine years, a building application to convert a CBD commercial dwelling into a residential dwelling was being processed.

“I’ve asked Seb Grose, who manages our planning function, to contact the developer and see if we can use that as a case study,” Mockler said.

“I’m hoping that we’ll be able to get some evidence around what are the constraints and get that documented.”

Hindley Street. This picture: Johnny von Einem

A Property Council of Australia spokesperson told CityMag that “vibrant” CBDs around the world have strong residential populations living locally, which underpins their economies.

“The Property Council of Australia is supportive of housing stock diversity and urban infill is certainly an important piece of the puzzle in solving affordability and helps grow our city resident population and economy,” the spokesperson said.

“Our latest Office Market Report noted the flight-to-quality narrative playing out in the Adelaide office market with demand in higher grade properties growing and weaker demand in lower grade office stock.”

The spokesperson said approximately 33 per cent of Adelaide’s CBD office stock was more than 40 years old, and the proposition of converting under-utilised office stock into CBD apartments would have to be assessed on a “site-by-site basis”.

“Ultimately it is a matter of whether an owner has the capital to perform such a conversion and whether the economics stack up,” he said.

The pitch comes as Adelaide is in the midst of a rental squeeze and price hike, with figures released by property research firm CoreLogic from January showing the city’s vacancy rate for that month was 0.4 per cent, which was 0.02 per cent less than 12 months before.

This is the second-lowest vacancy rate behind Perth, which recorded 0.05 per cent for January.

Adelaide’s median rents also increased from January 2022—2023 by 12.9 per cent to $518 per month.