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Sydney & Melbourne Continue To Lead Office Recovery

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JLL Research has released 4Q15 statistics on national office markets. The figures showed positive net absorption of 26,700 sqm over the quarter across CBD office markets and 296,900 sqm over the past 12 months. The net absorption result for 2015 was approximately 100,000 sqm higher than the 20 year average for CBD office markets (197,000 sqm).

However, the availability of backfill space from the relocation to new development stock resulted in the national CBD office market vacancy rate increasing to 12.6% from 12.0% in the previous quarter.

JLL’s Head of Strategic Research, Australia Andrew Ballantyne said, “Activity in the office sector is intrinsically linked to the health of the labour market. While the rate of hiring varied by state and industry sector, overall headcount growth was firm in 2015.”

“Employment growth was strongest in NSW and VIC and this was reflected in above trend net absorption results for the Sydney and Melbourne CBDs in 2015. However, the Brisbane CBD surprised on the upside with a sharp reduction in sub-lease availability over 2015,” said Mr Ballantyne.

The Sydney CBD recorded positive net absorption of 24,400 sqm in 4Q15 and 144,800 sqm over the past 12 months. However, the Sydney CBD vacancy rate recorded a marginal increase of 0.1 percentage point from 7.7% in 3Q15 to 7.8% in 4Q15.

JLL’s Head of Office Leasing, Australia, Tim O’Connor said, “The recovery in the Sydney CBD office market continues to be led by the technology sector. Expedia and Dropbox committed to new space and expanded their occupational footprint in the Sydney CBD in Q4.”

Mr O’Connor said, “The trend of new entrants into Sydney will remain a relevant theme in 2016. A number of technology and fintech firms are seeking to achieve geographical diversification in revenue streams and expand operations in the Asia Pacific region.”

Canberra recorded positive net absorption of 18,000 sqm over 2015. As a result, Canberra’s vacancy rate has trended down over 2015 and finished the year at 14.1%.

In 4Q15, the Adelaide CBD recorded net absorption of -11,300 sqm and vacancy increased to 16.7% over the quarter. The vacancy rate in Adelaide is now at the highest level since 1999.

Mr O’Connor said, “Labour force surveys provide a positive read for headcount growth moving into 2016. Furthermore, the momentum that we recorded in leasing enquiry over 2015 points towards activity in most markets over the first part of 2016. However, we remain cognisant that financial market volatility has the potential to negatively impact business confidence and delay corporate decision-making.”

“The easing of leasing incentives we recorded in Sydney over the latter part of 2015 will become a more pronounced theme in 2016. However, vacancy pressures in Perth, Adelaide and Brisbane will require owners to commit capital expenditure to reposition assets to ensure that they remain relevant in competitive leasing markets,” concluded Mr O’Connor.

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Article originally posted at: https://https://theurbandeveloper.com/articles/sydney-melbourne-continue-office-recovery