NATIONAL
Commenting on the national leasing market, Tim Molchanoff, Cushman & Wakefield’s Head of Office Leasing, Australia and New Zealand, said:
“Office markets across Australian CBDs remain in a period of adjustment following structural changes to the workplace brought on by the COVID-19 pandemic. We’ve seen upward pressure on vacancy in the past 12 months, as the impacts of a historically strong labour market have yet to flow through to office occupancy.
“Nationwide tenant demand continues to be strongest for higher-quality stock, with occupiers drawn to better amenity at a building and location level. It means vacancy rates for prime and secondary-grade assets are running at different speeds.
“The outlook for leasing markets varies by city and ultimately hinges on supply and demand fundamentals. We expect occupiers to continue adapting to flexible work practices despite a stronger push for workers to return to the office more frequently among some employers.”
NSW
SYDNEY CBD
Rob Dickins, Cushman & Wakefield’s Director, NSW Office Leasing, believes the Sydney CBD is becoming more core-centric.
“Looking at the CBD, while overall vacancies have tended to trend higher, the city core has been tightening. That’s driven by the flight to quality, given the CBD hosts over half of Sydney’s Premium-grade NLA with some of the best amenities and transport.
“Both actual and rumoured tenant pre-commitments have focused on new prime developments coming online in 2024. We expect that to draw tenants in from the fringe locations, placing further vacancy pressure outside the core.
“This trend is pushing prime rental growth higher while the balance of the Sydney market remains steady. We’re also seeing incentives outside the city core tick up amid softening demand, which, combined with rising outgoings, is capping net effective rents.”
SYDNEY NORTH SHORE
Giuseppe Ruberto, Cushman & Wakefield's Head of North Shore and Metropolitan Office Leasing, said:
“Sydney metro office markets have stabilised after a period of volatility, although tenant demand remains soft with hiring constrained by a tight labour market and as occupiers continue to assess space requirements.
“We expect markets along the North Shore will see greater upside with the extension and integration of the Sydney Metro slated from mid 2024, reducing travel times and better connecting markets like North Sydney, St Leonards and Chatswood with new population corridors.
“Demand for office space will be supported by employment growth, although the flight to quality means higher grade assets will benefit most. As construction costs and inflation stabilise and new migration rules provide labour inflows, renewed capacity can allow for more building upgrades. That can counteract near-term vacancy pressures for secondary stock and raise quality in the medium-term.”
VIC
MELBOURNE CBD
Marc Mengoni, Cushman & Wakefield’s National Director, Office Leasing Victoria, said:
“While vacancy rates in the Melbourne CBD office market have edged up slightly, we believe the peak is here or approaching.
“Pent-up demand is expected to support an uplift in absorption in 2024, particularly for prime grade assets, and keep the broader market steady. This will be helped by greater visibility of space requirements as more organisations mandate return to work policies and settle on the path for hybrid work.
“We’re seeing active tenants continue to be opportunistic, with many attracted to space that offers new, or quality existing fit outs that can be repurposed. That aligns with the broader trend of occupiers seeking to secure higher quality office space and selecting core locations that provide better transport access for their workforce.”
MELBOURNE FRINGE
According to Ben McKendry, Cushman & Wakefield’s National Director, Head of Metropolitan Leasing, Office Leasing, Victoria,
“Across Melbourne’s city fringe office market, decisions are predominantly driven by a flight to quality. Fitted suites are proving effective in satisfying demand, however, many tenants are increasingly selective amid broader budget pressures.
“The importance of building amenities, including retail and lifestyle elements, is essential as tenants’ needs change. These factors ensure that adaptability and tenant satisfaction will continue to play crucial roles in decision-making."
QLD
Billy Miller, Cushman & Wakefield’s Director, Head of Office Leasing, Brisbane, said that Brisbane’s CBD vacancy continued to tighten over the past six months, spurred by a limited development pipeline, especially in prime grades where demand is highest.
“We can see supply constraints are supporting a downward trend in CBD vacancy. No new buildings were added in 2023, and no completions are expected until the end of 2024. That will keep vacancies tighter into the first half.
“While tenants have options, quality space that’s fit-for-purpose is far rarer. There is also a significant lack of large, quality, contiguous tranches, so multiple prospective tenants are competing for very few options.
“This is pushing face rents up, helping offset rising outgoings. Effective rents are also trending upward as tighter vacancy pushes incentives down, especially in prime offerings.”
WA
Roly Egerton-Warburton Cushman & Wakefield’s Director, Head of Leasing, WA, said:
“Perth’s commercial office leasing market continues to benefit from the impressive performance of the WA economy. Staff are back in the city, net rents are increasing, and incentives continue to move downwards.
“Perth office occupancy has been the highest in the country while the labour market remains extremely tight. Premium and A Grade assets are benefitting as major firms upgrade to higher quality buildings to attract the best staff.
“The resources sector continues to drive the economy and the lion’s share of major lease transactions, alongside the State and Federal governments that have been highly active in the last 24 months.”
SA
According to Adam Hartley, Cushman & Wakefield's Director & Head of Office Leasing – SA,
“2023 finished strongly for the SA, with higher levels of enquiry mainly in the sub-300sqm satellite office market. The multi-year ‘flight to quality’ trend continues as companies seek to improve their office environment and amenity to attract and retain staff.
“Strong leasing enquiry has continued into 2024 with tenants approaching relocation more confidently. Tenants are still reviewing hybrid work arrangements but now have more established technology and work guidelines. That’s providing more certainty and visibility to plan for new office space.
“Due to elevated supply, the Adelaide CBD vacancy rate has increased significantly over the past two years. Large occupiers have taken the opportunity to relocate to higher-quality, latest-generation buildings. This has put downward pressure on lower A and B-grade vacancies and promoted refurbishment to attract tenants seeking to balance quality and value.
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