2021 Commercial Property Market Update: Sydney, Melbourne and Brisbane

SYDNEY MARKET STATUS

  • Property Industry and Government are encouraging return to office, but this is not at the rate that was anticipated
  • Some organisations throughout the state have started to assess head-count expectations for the next 12-18 months, including their return to the office strategies
  • Vacancy rate is still increasing due to the negative net absorption
  • For Sydney CBD, the office vacancy rate has more than doubled what it was a year ago
  • Vacancy has increased across all grades. Premium is tighter than A and B Grade vacancy, partly with potential of ‘flight to quality’
  • Supply has exceeded demand with a negative net take up of space. This is compounded by the increase in sub lease space from organisations who are trying to released excess space across multiple sectors
  • OUTLOOK:
    • In Sydney CBD, a further increase in vacancy is due to the new stock which is due to hit the market over the coming 12 months
    • Feedback from our team, is that most tenants are electing to delay, to see what could be offered in the market due to the current conditions. Tenants are not transacting at this stage, unless they have a specific requirement
    • Tenants willing to move are considering relocating into high quality fitted out premises, as they try to secure a ‘double’ incentive and rent-free period
    • We have seen an increase in competition from numerous fitted out sublease spaces with long lease terms available. This may suggest that there may be an increased volume of fitted out sublease space while tenants look for cost savings
    • There may never be a better time to relocate

Vacancy rates in key areas *

Chatswood   8.8%
Crows Nest/St Leonards   9.0%
Macquarie Park   8.5%
Newcastle 10.0%
North Sydney 13.0%
Parramatta   4.5%
Surry Hills   6.0%
Sydney CBD 11.5%

MELBOURNE MARKET STATUS

  • In Melbourne’s CBD the office vacancy rate has more than doubled what it was a year ago
  • The continued increase in vacancy is due to the overflow from organisations releasing excess space across multiple sectors. The building boom driven by precommitment from major tenants has also left a large portion of unfilled older office space. Along with pre-committed tenants handing over space before commencement
  • OUTLOOK:
  • An increase in demand from sectors such as Health and Community Services, Manufacturing, Consulting and Business Services organisations
  • A slight shift from smaller tenants currently in the CBD relocating to Metro and Fringe markets as they look to “cut the commute” and focus on suburban office locations closer to where their staff live
  • Businesses will seek to look for hub and spoke / satellite office locations within the Metro and Fringe market also. These factors could see an increase in demand in Metro however this demand would be still weak
  • 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 will also increase to recycle existing fit outs 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
  • An additional 3.4% of new stock is due over the next three months and will put an upward pressure on the vacancy rate

Vacancy rates in key areas *

East Melbourne  8.0%
Melbourne CBD 12%
Southbank 7.0%
St Kilda Road 7.0%

BRISBANE MARKET STATUS

  • Property Industry and Government are encouraging return to office, but this is not at the rate that was anticipated
  • The vacancy rate in the CBD remains at 12.8%

Insights from the TRS team suggest that:

  • Most larger organisations have their workforce still working from home in part or full time
  • Executives are starting to assess the pandemic’s long-term effects on their business. Firms are contracting or deferring any decisions about office space requirements
  • A Grade segments are stagnant
  • Gold Coast vacancy increased slightly in the last quarter, driven by negative demand for space
  • OUTLOOK:
    • There is a weak outlook for rent growth
    • Major infrastructure projects are underway, 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 *

Brisbane CBD 12.8%
Brisbane Fringe 14.3%

* Figures are based on TRS research Feb 21

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  • 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
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