Sydney Surges Into Second Half As Office Leasing Deals Spike

The New South Wales office leasing market is leading the way in the first half of 2015, with almost twice as much office space leased year-on-year.

According to Colliers International figures, there has been a 13% increase in the number of leasing deals done nationally in 2015, compared to the first half of 2014. The amount of space leased, in square metres, is up 22 per cent from 198,360 sqm last year to 241,551sqm this year.

New South Wales continues to power ahead, with 112,937 sqm leased year to date, compared to 64,629 sqm in the first half of 2014.

Colliers International National Director of Office Leasing Cameron Williams said there was increased traction nationally at the larger end of the market.

"This is in contrast to 2014 enquiry data, which is a reflection of what we are seeing on the ground - larger firms are driving demand for office accommodation in 2015 compared to 2014, when we saw smaller space in strong demand," Mr Williams said.

"Our enquiry data for the second quarter of 2015 also shows a significant shift in the industries searching for office space.

"In 2014 we saw the government sector dominating as they put large requirements into the market. However, as we move into the second half of 2015 we are seeing business services, communications and finance catching up and dominating both in enquiry levels and leasing deals being negotiated."
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Businesses searching for substantial office accommodation were driving demand across key office CBD markets, with business services, communications and finance sectors accounting for the lion's share of enquiries.

According to Colliers International data, enquiries for office space nationally increased 31 per cent from Q2 2014 compared to Q2 2015 for office space in the 1,000 sqm - 3,000 sqm category.

Sydney in particular saw an increase in this category, with a 25 per cent spike in demand from Q1 2015 to Q2 2015.

Mr Williams said activity was increasing in the Sydney CBD office mark, particularly in the last quarter.

"The big change has been growth," he said.

"The tenants that are in the market at the moment are predominately growth driven.

"The growth in the market is mostly being driven by technology companies and finance," Mr Williams said.

"At the smaller end of the market there has been a lot of activity from Asian investment companies that have a preference to be located in Sydney's midtown.

"This growth is naturally having a positive impact on net absorption and lessors are becoming more confident.

"The terms being offered to prospective tenants are quite different to what would have been offered 12 to 18 months ago. Incentives peaked across the market in late 2014 and sub-markets such as the midtown and the western corridor are really starting to tighten, particularly for larger occupiers.

"Core premium remains the most challenged market however, as we had anticipated, a flight to quality is occurring that will result in significant commitment within the core premium market during the second half of 2015."