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- Capital city office markets have shown resilience in the face of the impacts of COVID-19 over the first half of 2021, according to the Property Council
- Australia’s aggregate vacancy rate for all office markets climbed just marginally from 11.6 to 11.9 per cent in the six months to July 2021
- The overall CBD vacancy rate inched up from 11.1 per cent to 11.2 per cent
- Non-CBD markets had a slightly higher vacancy rate rise, from 13.0 per cent to 13.6 per cent
Despite recent lockdowns in New South Wales and Victoria, which are likely to have a negative impact on activity in the second half of the year, the national office leasing market rebounded well in the first half of 2021.
According to the Property Council of Australia’s Office Market Report, Australia’s aggregate vacancy rate for all office markets climbed just marginally, from 11.6 to 11.9 per cent, in the six months to July 2021. The report measures the levels of leased space, not worker occupancy of office space.
The overall CBD vacancy rate increased from 11.1 per cent to 11.2 per cent, while non-CBD markets had a slightly higher rise, from 13.0 per cent to 13.6 per cent.
The figures show a pleasingly steady demand for office space despite the pandemic’s interruptions, according to Property Council chief executive Ken Morrison.
“Australia’s office markets have shown remarkable resilience over the past six months, with overall aggregate vacancy levels increasing only slightly,” he said.
“Excluding Melbourne, demand for CBD office space grew by 85,000 sqm over the six months, a result few would have predicted given the impacts of the pandemic.
“By contrast, demand for space in the Melbourne CBD dropped by more than twice as much as its previous largest six-monthly fall on record.”
The report found that all capital city vacancy rates declined. Rates in non-CBD markets showed a broader spread, with half increasing and half declining.
CBRE Head of Office Leasing Pacific, Mark Curtain, said the commercial real estate agency recorded in excess of 300,000sqm of new deals in 1,000sqm-plus assets across Australia through the first six months of the year.
“That is down on the pre-COVID levels of about 500,000sqm in an average six-month period, but well up on 2020’s activity in the depths of the pandemic,” he said.
Mr Curtain said small and medium tenant activity was a feature.
“Flexible and hybrid working arrangements are less likely to impact smaller office users, which by-and-large are experiencing favourable business conditions and acting with urgency to capitalise on current market incentives,” he said.
“We anticipate this tenant cohort will have an increasingly important role in asset strategies for landlords going forward, seeking less onerous lease conditions than larger occupiers.”
Mr Curtain said the rapid rise in sublease space in 2020 peaked in the first half of the year and had now retreated.
“We believe the peak of the cycle has now passed and the total across Australia should gradually trend down over the next few years,” he said.
Mr Morrison said the office market was still in a state of flux with challenges on the horizon.
“Lockdowns continue and the impacts of the pandemic are still working through the economy, so CBD recovery needs to be a priority for governments at all levels,” he said.
“It is a CBD’s commercial strength that underpins its role as premier cultural, dining, entertainment, retail and tourism precinct for the broader population. It’s a future we all have a stake in.”
