August 2021 Commercial Property Market Update: Sydney, Melbourne and Brisbane

MARKET STATUS

  • Property Industry and Government are encouraging return to office, but not at the rate that was anticipated. The continued lockdown in Sydney reinforces remote working
  • With the further lockdown, the evaluation of space continues, including finalising decisions on headcount for the next 12 months, and return to the office strategies
  • As anticipated vacancy rate has increased due to the negative net absorption
  • For Sydney CBD, the office vacancy rate has more than doubled what it was a year to 18 months ago and experiences negative demand
  • Vacancy has increased across all grades. Premium is tighter than A and B Grade vacancy, partly with potential of ‘flight to quality’
  • Supply still exceeds demand with a negative net take up of space. Organisations look 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
    • In Sydney CBD, an increase in vacancy will continue due to the new stock which is due to hit the market over the coming 6-12 months
    • Tenants are relocating into high quality fitted out premises, as they try to secure a ‘double’ incentive and rent-free period
    • 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
    • Parramatta CBD’s office vacancies have increased by 3.8% (predominately in the premium level), for the first time in 10 years due to the completion of new office accommodation and the on off withdrawal of NAB

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   5.5%
Surry Hills   6.0%
Sydney CBD 11.5%

MELBOURNE MARKET STATUS

  • Property Industry and Government are encouraging return to office, but not at the rate that was anticipated. The continued ‘snap’ lockdowns in Melbourne reinforces remote working.
  • 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:
  • As we work with our clients on their workplace strategy analysis, we see more tenants planned to make informed decisions to transact
  • A 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 continued to increase 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 3.4% of new stock has 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 with ‘Fridays in the City’ but this rate is below what 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 remotely, in part or full time
    • With the ‘snap’ lockdowns, the evaluation of space continues, including decision making on headcount for the next 12 months, and return to the office strategies
    • Executives are starting to make decisions about office space requirements
    • 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
      • 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 *

Brisbane CBD 12.8%
Brisbane Fringe 14.3%

* Figures are based on TRS research May – July 21

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
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