Demand for office space has increased in every Australian capital city CBD, defying reports of a pandemic downturn.
According to the Property Council of Australia’s latest Office Market Report, tenant demand increased by one per cent on average across the country’s CBDs, and 0.7 per cent in non-CBD markets.
Every capital city market except Sydney and Brisbane recorded an above-average increase.
While vacancy rates have edged higher in recent times, the increase has come on the back of increased supply – not a lack of demand as has been broadly reported.
Property Council of Australia Chief Executive Ken Morrison said the data underlies the strength in the office sector. “These are a striking set of figures which illustrate that the office is alive and well in today’s economy, even as the pandemic changes how we use workspaces,” Mr Morrison said.
“While many expected this once in 100-year global pandemic to cause a major spike in office vacancy, these figures show that hasn’t eventuated. Aggregate vacancy levels have risen slightly from 11.9 per cent to 12.1 per cent, the driver of this has been new supply of office space, not a drop in demand. The reality is that most CBD businesses continue to see the office as integral to their future, and that is reflected in the increased demand for office space over the past six months.”
The property council report compares the current pandemic to the recession in the 1990s and the comparison is stark according to Mr Morrison. “During that crisis, vacancy rates blew out by a massive 15.6 per cent over three years, whereas during the two years of the COVID-19 pandemic, they’ve shifted only 3.3 per cent,” he said. The report shows the national vacancy rate lifted slightly (0.2 per cent) in the six months to January 2022, driven by an increase in supply of office space coming onto the market.
“The supply of office space across Australia has been above the historical average in three out of the last four reporting periods, which means since the onset of the pandemic, office developments have continued to come online, and demand for it has largely kept up,” Mr Morrison said. “The data matches what we’re hearing, and that is that tenants clearly see collaborative and well-designed office space as a key component of their ‘new normal’ of working.”
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