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Office Market Set For Tech-Led Recovery

Technology

A tech-led recovery is on the cards for Australia’s CBD office markets as IT and Telecommunications businesses dominate tenant enquiry, according to new

Colliers International research.

Colliers International’s H2 2014 CBD Office Research and Forecast Report, Leading the Charge, found while Business Services still leads enquiry, followed by Government, the largest spike in year to date tenant enquiry has been from the IT and Telecommunications sector.

The Business Services sector incorporates industries such as business consulting and marketing, personnel and recruitment, accounting, legal, design and scientific.

Nationally, Colliers International has recorded 940 enquiries for 840,000 square metres of CBD office space for the year to date.

For the same period in 2013, 856 enquiries were recorded for 712,000 square metres.

This represents an 18 per cent increase year-on-year by area, and a 10 per cent increase by volume.

“The Business Services sector remains the main driver of demand to date in 2014 and this is consistent every year,” Colliers international managing director of office leasing Simon Hunt said.

“At a national level, Business Services, as occupiers, dominate our CBD office markets.

“Year to date, this sector has accounted for around 21 per cent of all CBD enquiry nationally (840,000 square metres).

In Melbourne CBD, Brisbane CBD and Perth CBD, it is far higher.

“However, most interestingly, the sector with the strongest increase has been IT and telecommunications, accounting for 18 per cent of enquiry year to date.

This is up from 9.9 per cent in 2013.

“Increases in IT and T were observed across all capital cities, with enquiry from this sector more than doubling in Brisbane CBD and with significant increases in Sydney, Adelaide and Perth CBDs.

“This suggests that the national office market recovery is not just being driven by business services but technology as well, a distinct change from previous years.”

Colliers international and national director of technology services Kevin Burman said job growth in the technology sector was exceeding the rest of the economy by three to one, with this trend forecast to continue through to 2020.

“Many of these new roles are office-based, particularly where services are being provided to CBD-based corporations,” Mr Burman said.

“Over the past five years, there has been substantial growth in IT and T out-sourcing, known as the ‘as a service’ model. Many companies have reduced the size of their internal IT and T departments, and the outsourced suppliers of technology products and services have grown accordingly.

“Demand for cloud computing, which allows organisations to pay just for the IT and T services they physically consume in a month, has grown exponentially, and many new start-up companies have emerged alongside established multi-nationals.

“To attract and retain staff, and to be centrally located close to their customers, a significant proportion of high-technology companies are choosing CBD offices, particularly for customer-facing roles.

“We estimate that over 240,000 square metre leases to IT and telecommunications companies are due to expire across Australia by the end of 2015.  We expect continued growth in the IT and T market to result in further demand for supporting office space going forward, although there are some offsetting reductions where companies reduce headcount as they outsource roles to third party suppliers, particularly those that are based overseas.”

The Colliers International report found the sector with the biggest decline in enquiry for office space year to date was the Resources sector.

After peaking in 2011 with 6.7 per cent of enquiry, this sector has now reduced to just 1.5 per cent with the biggest declines in the Brisbane and Perth CBDs.

Government has also seen an increase in enquiry, up from 13.3 per cent last year, with consolidation of major Government occupiers a significant factor.

Enquiry from the Finance and Insurance sector remains steady, year to date accounting for around 12.5 per cent of enquiry, slightly higher than 2013 (10 per cent).

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Article originally posted at: https://theurbandeveloper.com/articles/office-market-set-for-tech-led-recovery