CBD office market off to a strong start to the year: Simon Hunt

CBD office market off to a strong start to the year: Simon Hunt
Property ObserverDecember 7, 2020

GUEST OBSERVATION

The national CBD office market is off to a strong start in 2015 on the back of a busy 2014 which saw demand for space on the rise.

While the national vacancy rate has risen slightly to 11.2% from the 10.6% recorded at the last count in August last year, the shift is minimal and we expect it to remain business as usual within Australia’s business community going forward in 2015.

We are coming off the back of a strong finish to 2014, with enquiry levels and leasing deal volumes on the rise. According to Colliers International data, enquiry for the December 2014 quarter was up 75% compared to the December 2013 quarter. The greatest demand was for space 3,000sq m and above, with this market up a record 173% on the December 2013 quarter.

For the full calendar year, Australian business enquired about 2,256,814 square metres of office space in 2014 compared to 1,813,540 square metres of office space in 2013, a national increase of 24%, pointing to improving business confidence.

Looking further afield, our Colliers International counterparts in the US are reporting positive signs of growth which reflect an increase in confidence that will flow on to Australian markets. Job growth drove office demand in both the U.S. and Canada through the first three quarters of

2014 and the outlook for 2015 is for a continuation of this growth.

Employment grew year on year in both countries, with the US on track to create the most jobs in 2014 since 1999. Office employment surpassed 30 million jobs for the first time in September 2014 and now stands about 727,000 positions more than the pre-recession peak in July 2007.

Our colleagues expect the economic recovery to continue at a similar pace through 2015. IHS Global Insight projects an addition of nearly 2.5 million jobs in 2014, increasing slightly to nearly 2.6 million jobs in 2015. This would amount to four consecutive years of net job gains exceeding 2 million — the longest such stretch since the 1997-2000 period. This is great news from a global economic perspective and for our local office markets, given the strong influence of US markets on the rest of the world.

The economic outlook for Australia for 2015 is also promising.

We concur with Deloitte Access Economics’ forecast for continued growth in white collar employment in the years ahead, which is good news for Australia’s office markets.

 

White collar employment forecasts indicate that business services and financial services will show strong demand for office space over 1,000 square metres, pointing to strong short term demand for larger, open plan workplace environments and less decentralisation of employees occurring.

Tenants returning to CBD markets was an emerging trend in 2014, and is anticipated to continue as corporates seek central locations, close to amenities to house their administration staff.

According to Deloitte Access Economics’ respected White Collar Employment forecasts, the top five growing office sectors that will lead tenant demand nationally in 2015 will be business services, IT&T, financial services, health and accommodation services.

Based on the net growth in jobs for these sectors, of between 10,000 to 14,000 employees, over 150,000 square meters of space will be required to meet space demand.”

Simon Hunt is managing director of office leasing at Colliers International.

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Office

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