The Property Council of Australia’s latest Office Market Report has highlighted the resilience shown by the Sydney CBD office market.
The vacancy rate remains below 10 per cent for Sydney’s CBD office market, despite various lockdowns and COVID-19 restrictions.
Across the country, the aggregate vacancy rate for all office markets increased only slightly from 11.6 to 11.9 per cent for the six-month period to July 2021, the Office Market Report found.
The report measures the levels of leased space, not worker occupancy of office space.
Sydney has remained one of the most well-equipped markets to mitigate new challenges faced by the commercial office sector, as one of two mainland CBD markets across the country that recorded vacancy below 10 per cent.
While Sydney did actually experience an increase in vacancy overall, this was the result of a significant amount of new office space coming online – demand actually grew by 27,000sq m.
As the property industry continues to fight through extended lockdowns, Acting NSW Executive Director of the Property Council of Australia, Lauren Conceicao said the recent office occupancy rates were encouraging.
“Sydney’s CBD has been a slow-moving story, but tenant demand has increased by 0.6 per cent from January to July 2021,” Ms Conceicao said.
“Vacancy overall has increased from additional supply coming online, an increase from 8.5 per cent to 9.2 per cent,”
“Net CBD demand is above historical average, with a notable uptick in the availability of subleasing and demand for premium is at its highest.”
Ms Conceicao said the resilience of the office market during this crisis is an excellent result for positioning Sydney as the best global city to invest in.
“Although these results were positive, learning from the Melbourne experience, we need to ensure we inject life back into our CBDs once we are through lockdown to save our city,” she said.
Sydney and other capital city office markets have shown remarkable resilience in the face of the impacts of COVID-19 over the first half of 2021, with the key exception being the Melbourne CBD where demand for office space fell by the largest level on record.
“Melbourne is showing the lowest demand since records began in 1990, which highlights the need to get the engine roaring on our Sydney CBD for the benefit of the economy in the short, medium and long term,” Ms Conceicao said.
“We can’t afford to become complacent so we must do everything within our capabilities to ensure we don’t do permanent damage to our CBDs.
“There has never been a more critical time for the industry, these next few months could have a very long-lasting effect on our future, so we will continue to do everything we can to support and advocate towards coming out of these lockdowns with as little harm as possible.”
Overall CBD vacancy edged higher from 11.1 per cent to 11.2 per cent, while non-CBD markets also recorded a small vacancy increase, from 13 per cent to 13.6 per cent.
Property Council Chief Executive Ken Morrison said that the numbers reflect pleasingly solid demand for office space amid the disruptions of the pandemic.
“Australia’s office markets have shown remarkable resilience over the past six months, with overall aggregate vacancy levels only increasing slightly,” Mr Morrison said.
“Excluding Melbourne, demand for CBD office space grew by 85,000sq m over the six months – a result that few would have predicted given the impacts of the pandemic.
“In contrast, demand for space in the Melbourne CBD dropped by more than twice as much as its previous largest six-monthly fall on record.
“As a result, vacancy in Melbourne CBD increased to 10.4 per cent, which also has some 220,000sq m of new supply coming online over the next six months.”
Vacancies in other capital cities all declined. Brisbane declined to 13.5 per cent, Perth to 16.8 per cent, Adelaide to 15.7 per cent and Canberra to 7.7 per cent.
“Vacancy results in non-CBD markets showed a broader spread, with half increasing and half declining. In aggregate, demand for office space in non-CBD markets was flat,” Mr Morrison said.
Mr Morrison said office markets still faced considerable uncertainty.
“While office markets have shown pleasing resilience, challenges remain,” he said.
