Demand for office space at eight-year peak

Demand for office space at eight-year peak

21 April 2017

Australia’s office landlords had their strongest start to a calendar year since 2009 with surges in both leasing deals and inquiries for new office space, reports the AFR.

According to the Colliers International Office Demand Index, enquiries for new business premises across the major markets were up 41 percent in the first quarter of the year compared with the same time last year, while the number of deals struck rose 30 percent.

Landlords leased an additional 63,000 square metres of office space over the quarter compared with a year ago, with enquiries by area up 16 percent.

Colliers International managing director of office leasing, Simon Hunt, said the healthy leasing conditions on the east coast were underpinned by white collar employment growth.

“Demand for small-scale office space from the business services, health, IT and community services sectors is especially strong, particularly in New South Wales and Victoria, as the markets get tighter and refitted suites become the popular leasing option,” Mr Hunt said.

Over the quarter, enquiries were up 33 percent in Sydney and 13 percent in Melbourne—the country’s two strongest office markets—pointing to further tightening of vacancy rates and more upward pressure on rents.

In Brisbane, the office vacancy rate has declined recently but still stands at over 15 percent. But there were more positive signals for landlords with enquires for almost 100,000 square metres of office space received in the first quarter of the year, up 123 percent on the same time a year ago.

Enquiries were up 94 percent in Perth compared with the December 2016 quarter, providing some signs of encouragement for local landlords.

Adelaide’s office market looks set for a major boost with enquiries up 285 percent over the quarter to 85,320 square metres.

Canberra was the only office market not to record a rise in demand, which Colliers International said was due to there being few large requirements for space in the government-dominated tenant market.

Emerging trends over the quarter included an overall shrinking in space requirements, highlighting the shift to flexible working, and a preference for smaller businesses to take up space in B-grade buildings with larger businesses preferring A-grade buildings.