Sydney Office Market Update – Feb 2O23

Market status

• It’s still a tenant’s market for Sydney office space, with vacancy rates in the CBD up 2 percentage points in H2 2022 to 11.3%.
• Vacancy for premium space in the Sydney CBD is slightly lower at 10%, and there’s very limited availability of small premium offices to lease.
• Vacancy rates remained high – around 20% – in North Sydney, Macquarie Park, Chatswood and Crows Nest/St Leonards. Parramatta was the only location to buck the trend, with a 1.5 percentage point fall in vacancy rates to 18%.
• Hybrid work is being embraced “as a given” but employers are wrestling with how to accommodate flexible working while maintaining company culture. The “flight to quality” trend continues with tenants gravitating towards office space in prime locations with modern amenities.

Outlook

• In 2022, TRS helped more of our clients relocate than in any previous year, with many taking the opportunity to upgrade their offices. Quality remains front of mind for companies to entice workers back into the office and attract new talent in a tight labour market.
• Many landlords are providing speculative fit-outs, from suites to whole floors, to attract tenants into vacant space. But with the incentives available in Sydney, a bespoke fit-out may be the wiser option.
• Space is becoming vacant as large corporates right-size and/or take up space in new buildings. So, it’s important to work with an independent tenant representative to make sure you can access space that may not be advertised on the open market.
• Increasingly, sustainability credentials are an important consideration. However, tenants can baulk at the higher rent for more sustainable buildings.
• Around 90,000 sqm of space is expected to be added to the Sydney market in 2023.

Vacancy rates