Demand for CBD office space continues its recovery
Tenants are slowly returning to CBD offices around the country as businesses get back on track.
According to the Property Council of Australia’s latest Office Market Report, tenant demand
was 0.5 per cent higher on average across the country’s CBDs.
Property Council Chief Executive Ken Morrison said the figures were encouraging given the damage done over the past few years.
“In a healthy sign for our CBDs, the office market continues to defy previous dire predictions, with demand still in positive territory after nearly three years of the pandemic,” Mr Morrison said.
“Demand for office space was strongest in Brisbane at more than three times historic average, with Sydney, Perth and Adelaide also above average, while demand grew by 0.1 per cent in Melbourne and dropped in Canberra by 0.1 per cent.
“While the Australian office vacancy increased by 0.8 per cent to 12.9 per cent over the six months to July 2022, it’s new office space that is driving this outcome, not businesses wanting less office space.”
Mr Morrison said demand is now starting to rebound, but there are still above-average levels of supply.
“All capital city CBD markets experienced new supply increases, a combined 1.2 per cent, but supply is forecast to taper off in coming years,” he said.
Mr Morrison said demand remains strong despite predictions of a crash.
“This has been underpinned by strong employment and the recognition that an office in a city
is fundamental to the success of many businesses,” he said.
According to the July Office Market Report, the overall CBD vacancy increased from 11.3 to 12 per cent, while non-CBD areas saw a rise from 13.9 to 15.2 per cent.
Brisbane and Adelaide both recorded vacancy decreases, from 15.4 to 14 per cent and 14.5
to 14.2 per cent respectively, the only two CBDs in which supply didn’t outstrip demand.
The vacancy rate rose in the other capital cities, from 6.3 per cent to 8.6 per cent in Canberra, 9.3 per cent to 10.1 per cent in Sydney, 11.9 per cent to 12.9 per cent in Melbourne and 15 per cent to 15.8 per cent in Perth.
Sublease vacancy increased slightly in both the Australian CBD and non-CBD markets, with Melbourne responsible for more than half of all CBD sublease vacancy.
Future supply in the CBD markets is expected to be below the historical average until July 2025, while in the non-CBD markets supply is expected to be above the historical average until July 2023 before reducing in the following years, according to the report.
“While the office market has proven to be resilient and demand is in positive territory, our CBDs still need attention,” Mr Morrison said.
“While demand for space is increasing, the number of actual office workers in our city centres is well below pre-pandemic levels and threatens the ecosystem of cafes, restaurants and retailers that help make our CBDs such special places.
“The recovery in our CBDs needs to be top of mind for governments and businesses even as we deal with elevated levels of COVID-19 in the community.”