All but stagnant CBD employment puts office demand in the slow lane

GUEST OBSERVATION

It’s impossible not to notice that Australia is shedding blue collar jobs. But what about their white collar equivalents and impacts on CBD office demand?

According to Deloitte Access Economics’ latest employment forecasts, while job growth outside of the nation’s CBDs came to a halt in the second half of 2013, business district office jobs are the only big labour market group adding jobs of late. In fact they actually gained momentum in the second half of 2013.

Yet this growth is small, and the recovery is reliant on the positives of low interest rates, a falling dollar and signs of greater willingness by businesses to take on risk.

Although the news will get better in the next couple of years, nothing like the pre-GFC performance of office demand looks to be on the horizon.

With the exception of Sydney , the nation’s office markets are almost all seeing slow growth, the finance sector is still cutting its headcount and the usually reliable business services sector is losing jobs even faster.

Like Sydney, Adelaide is losing jobs, continuing the worsening trend evident since the GFC and Melbourne is motoring in low gear – also losing finance jobs, but with some business services sector resilience.

There are only two exceptions to the ‘slow growth’ character of Australian office markets: Perth, where growth is still good but slowing as cost cutting by the resources sector takes a continuing toll and the state government tightens purse strings; and Brisbane, where recent job gains have restored some previous losses.

Perth is more exposed to resource-related cutbacks than any other state and things are likely to get worse before they get better. Brisbane is already seeing a tentative recovery underway.

So, with a blue collar slowdown and white collar growth faring better inside CBDs than outside them, where to next?

Overall job growth enters 2014 devoid of momentum, yet there are some positives. One is that employment is a backward looking indicator and the news of late on the economy has been improving – retail sales growth is accelerating, evidence of a recovery in housing construction continues to strengthen, and the news out of the US looks good.

That trend points to a few reasons to expect that better job news lies ahead.

The upshot is that Deloitte Access Economics projects office demand growth to improve further from here, but from a pretty weak starting point. 

Damian Winterburn is the national leader of Deloitte Capland Real Estate Advisory.