- Colliers’ Office Demand Index revealed a 4% increase of inquiries on 2022
- Leasing deals are weighted toward prime-grade assets with exciting locations.
- Enquiries increased 40% for office space under 1,000sqm, 6% for up to 2,999sqm.
Enquiry levels for office space around the country continue to bounce back from the pandemic lows with new data showing demand is recovering.
Colliers’ Office Demand Index reveals that there was 1.690 million sqm of inquiry nationally during the second half of 2022 – a four per cent increase compared to the start of the year and a five per cent increase on 2021 levels.
Leasing deal activity recovered strongly over the first half of 2022, up 5.2 per cent on H1 2021, but during the second half of the year, momentum slowed amid concerns surrounding lower economic growth expectations and headwinds leading into 2023.
However, Colliers’ leasing volumes still surpassed 2021, up four per cent on the number of deals, driven by a continued uplift in activity from tenants seeking office space under 1,000sqm.
Post-pandemic rebound
Colliers, Managing Director Office Leasing, Simon Hunt, said the numbers suggest that demand for office space is returning post-pandemic.
Mr Hunt said, “There was a 40 per cent increase in enquiry for office space under 1,000sqm and a six per cent increase for office space between 1,000 – 2,999sqm when comparing H2 to H2 2021.
“We have witnessed increasing demand from smaller occupiers who have proven more nimble and agile while several larger occupiers are taking more time to finalise their post-pandemic office requirements.”
Demand for prime-grade offices
Leasing deals are weighted towards prime-grade assets as relocation activity continues to be driven by requirements for a higher office quality and the overall experience that the office and its location have to offer.
As a result, 60 per cent of leasing deals over 2022 were from tenants committing to prime-grade offices Mr Hunt said.
Despite this, the prime vacancy has risen partly due to vacant new or refurbished stock becoming available to the market.
This has driven the national CBD vacancy rate up by 0.6 percentage points to 12.8 per cent in Australia’s six major CBDs, according to PCA’s latest vacancy report.
Mr Hunt said, “The 0.6 percentage point increase to the national CBD vacancy rate was largely underpinned by new developments and refurbished office buildings coming to market in Sydney and Melbourne.
“The ‘flight to quality’ and experience driven by occupier preferences for higher quality space will continue and is set to reduce national CBD prime office space vacancy over 2023.”
Colliers National Director of Research Joanne Henderson said, “small tenant activity for office space below 1,000sqm appears to be offsetting larger contractionary moves within the CBDs to a significant extent, resulting in a relatively neutral net absorption result of only -138sqm and a decline in vacancy levels in Perth and Brisbane.”
“New supply in the Adelaide, Canberra and Perth CBD markets, which surpasses the long-term average, will add vacancy pressures over the next six-twelve months, but we expect this will be addressed by the healthy levels of occupier demand we are seeing in these markets and heightened expansionary activity from smaller tenants” she said.
