Demand for office space remains strong as tenants slowly return to CBDs across the country.
According to the Property Council of Australia’s latest Office market reporttenant demand was 0.5% higher on average in the country’s CBDs.
Property Council chief executive Ken Morrison said the figures were encouraging given the damage caused by the ongoing blockades.
“In a healthy sign for our CBDs, the office market continues to defy previous dire predictions, with demand still in positive territory after almost three years of the pandemic,” Morrison said.
“Demand for office space was strongest in Brisbane, more than three times the historical average, with Sydney, Perth and Adelaide also above average, while demand grew 0.1% in Melbourne and was down 0.1% in Canberra.
“While Australian office vacancy increased by 0.8% to 12.9% in the six months to July 2022, it is new office space that is driving this result, not companies wanting less office space.”
Although demand is now returning, there are still above-average supply levels according to Morrison.
“All of the capital’s CBD markets saw new increases in supply, a combined 1.2%, but supply is forecast to taper off in the coming years,” he said.
Morrison said that while many predicted a fall in demand for office space and high vacancies, that has not happened.
“This has been supported by strong employment and the recognition that an office in the city is critical to the success of many businesses,” he said.
According to the July Office Market Report, overall CBD vacancy increased from 11.3% to 12%, while non-CBD areas increased from 13.9% to 15.2%.
Brisbane and Adelaide recorded vacancy declines, from 15.4% to 14% and 14.5% to 14.2% respectively, the only two CBDs where supply did not outpace demand.
The vacancy rate increased in the other capital cities from 6.3% to 8.6% in Canberra, from 9.3% to 10.1% in Sydney, from 11.9% to 12.9% in Melbourne and 15% to 15.8% in Perth. .
Sublease vacancy increased slightly in both the Australian CBD and non-CBD markets, with Melbourne accounting for more than half of all CBD sublease vacancies.
Future supply in CBD markets is expected to be below historical average until July 2025, while supply in non-CBD markets is expected to be above historical average until July 2023 , before declining in subsequent years according to the report.
“While the office market has proven resilient and demand is in positive territory, our CBDs still need attention,” Morrison said.
“While demand for space is increasing, the number of actual office workers in our city centers is well below pre-pandemic levels and threatens the ecosystem of cafes, restaurants and retailers that help make our CBDs are such special places.
“The recovery of our CBDs must be the priority of governments and businesses, even as we deal with high levels of COVID-19 in the community.”