This article is from the Australian Property Journal archive
DESPITE occupancy rates falling, rising and then stalling over the first half of the year amid COVID, colds and flu, demand for office space increased by 11% to more than 1.622 million sqm, led by a spike in enquiries in Brisbane.
According to Collier’s Office Demand Index this was driven by a post lockdown appetite for the 3,000 sqm-plus market in particular, with an additional 61,000 square metres enquired for in the first six months of 2022 compared to the same period in 2021.
Interest in other office size segments also increased, with a 4% uplift in enquiries for space under 1,000 sqm and a 22% increase for office space between 1,000 to 2,999 sqm.
“We have witnessed a record amount of demand for office space in the first half of 2022,” Simon Hunt, managing director office leasing, Colliers said.
Office demand for the June quarter came close to breaching historical quarterly high with almost 925,000 sqm enquired for, on par with Colliers’ recorded highest quarterly demand in the first quarter of 2021.
Cameron Williams, national director office leasing, Sydney CBD said tenants are looking to trade up on quality and location, making for a record half year for the Sydney market in terms of demand.
East coast CBD markets are proving the most popular locations, with the Sydney, Melbourne and Brisbane CBDs all witnessing a rise in demand for the first half of 2022 compared with 2021. Brisbane experienced the highest increase in demand, with a 175% increase on office area enquired for and a 48% increase on the number of enquiries.
“Similar to Sydney and Melbourne, Brisbane tenants are looking for accommodation that will attract their talent back to the office and therefore are seeking high-quality spaces with a prime location and best-in-class amenity,” said Matt Kearney, national director office leasing, Brisbane CBD, Colliers said.
Enquiries for office space in the Sydney and Melbourne CBDs also indicated that businesses seeking space are seeking more area, with these markets recording an 11% and a 35% increase, respectively, for the amount of area enquired for in the first half of 2022 compared to 2021.
Andrew Beasley, national director office leasing, Melbourne CBD said the major factor driving enquiry is the “flight to quality” as tenants of all size ranges seek out better quality office accommodation to assist with the return to work story, along with the battle for staff retention and attraction given the competitive labour market.
The period began with office occupancy in the major cities of Sydney and Melbourne plummeting to single-digit figures as the holiday season gave way to the Omicron wave. Workers steadily returned to the office in the following months before the recovery stalled in June, with Sydney at 55% occupancy, Melbourne at 49%, according to the Property Council of Australia’s latest data, while Adelaide (71%) and Brisbane (64%) were steady, and Canberra dropped from 60% to 53%,
The new Colliers data showed all segments of the Perth market also saw an increase in demand from the second half of 2021 to the first half of 2022, with the highest jump in enquiries recorded for space over 3,000 sqm with a 266% boost.
Jemma Hutchinson, national director office leasing, Perth said, “We are finally seeing the premium and A-grade end of the market lifting their face rents and incentives starting to decline.
“It is time to shift the market, and move with the demand.”
Canberra bucked the national trend. Enquiries for office space under 1,000 sqm jumped by 34% year on year, indicating activity by smaller businesses in the government-dominated market.
“With the continued return to office trends across the Commonwealth and Territory governments, we are expecting a clear uplift in demand later in 2022 once the Labour Government has had enough time to settle into their new roles,” Aaron Bruce, national director office leasing, Canberra said.
Small businesses have also been driving office space enquiries in Adelaide, with a 25% increase in the number of enquiries for businesses seeking office space under 1,000 sqm.
