2022 Office Market Update: Sydney, Melbourne & Brisbane

Sydney market status

• The Omicron Variant in NSW encourages remote working
• Executive focus has shifted to employee wellbeing, sustainability, technology, and connectivity
• As anticipated vacancy rate has increased 1.5%pp from the past 6 months due to the negative net absorption. This includes the 18O,OOO SQM of new prime office buildings including AMP’s Quay Quarter Tower and Circular Quay Tower, which 6O% is committed.
• Vacancy has increased across all grades. Premium is tighter than A and B Grade vacancy, partly with potential of ‘flight to quality’
• Organisations are still looking to sub lease space or ‘hand back’ office space to their Landlord

Outlook

• As we work with our clients on their workplace strategy analysis, we see more tenants making informed decisions to transact. To either upsize, downsize, or operate at a hybrid model
• We anticipate Sydney CBD vacancy rate will increase as more new stock hits the market over the coming 6 months
• Prediction for Tenants to relocate into high quality fitted out premises, as they try to secure a ‘double’ incentive and rent-free period. This also encourages employees to come back to the office
• An increase in competition from numerous fitted out sublease spaces with long lease terms available continues. This has proven that there is an increased volume of fitted out sublease space while tenants look for cost savings

Vacancy rates in key areas *

Melbourne market status

• The Omicron Variant in VIC encourages remote working
• Executive focus has shifted to employee wellbeing, sustainability, technology, and connectivity
• In Melbourne’s CBD the office vacancy rate has nearly trebled since the start of COVID in 2O2O
• The continued increase in vacancy is due to the overflow from organisations releasing excess space across multiple sectors
• Melbourne’s CBD sub leasing has almost doubled in the last 6 months reaching the highest level since 1994

Outlook

• As we work with our clients on their workplace strategy analysis, we see more tenants making informed decisions to transact. To either upsize, downsize, or operate at a hybrid model
• We anticipate continued increase in demand from sectors such as Health and Community Services, Manufacturing, Consulting and Business Services organisations
• Although not always the right decision for tenants, some may prefer fitted space, with organisations looking at the short to medium term. The demand for fitted space continues to increase with the ability to recycle existing fitouts and utilise the incentives on offer as rent free or abatement to offset operational costs. A tenant’s decision should always depend on what will work for them, rather than what works for other businesses
• The additional new stock from the first half of 2021 continues to see an upward pressure on the vacancy rate
• Feedback from our sales team is that larger corporates are finalising office decisions with greater incentives and greater flexibility in leasing arrangements

Vacancy rates in key areas *

Brisbane market status

• The Omicron Variant in QLD encourages remote working
• Executive focus has shifted to employee wellbeing, sustainability, technology, and connectivity
• The vacancy rate in the CBD increased 2% over the last 6 months to 15.8%
• Insights from the TRS team suggest that:
  • Most larger organisations have their workforce still working remotely, in part or full time
  • Executive’s focus has shifted to employee wellbeing, sustainability, technology, and connectivity
• A Grade segments are stagnant
• Gold Coast vacancy holds in the last quarter

Outlook

• As we work with our clients on their workplace strategy analysis, we see more tenants making informed decisions to transact. To either upsize, downsize, or operate at a hybrid model
• There is a weak outlook for rent growth
• Major infrastructure projects are near complete, including Cross River Rail, Queens Wharf, Brisbane Metro and Brisbane Live. This will and will continue to support local economy and provide some confidence to the business community

Vacancy rates in key areas *

* Figures are based on TRS research Aug – Jan 22

Why TRS?

• TRS’ independence from landlords / agents creates stronger leverage on your behalf
• Landlords believe they hold an “advantage” over tenants; we secure better terms for tenants to safeguard your position
• We offer advisory services across commercial leasing, renewals, fit outs and make goods
• Whether you stay or go TRS can optimise your negotiations on any lease service