- Over 30,000 square metres of office space leased
- Flight to quality trend continues to prove true
- Long term work from home disruption seems not to have materialised
Centuria Office REIT (ASX: COF) has announced it has leased over 30,000 square metres of office space across HY23. The company also has a healthy scorecard across the board, the company said its office occupancy rate is 96.4 per cent, and leasing since Covid hit Australia is over 150,000 square metres – equivalent to over half its portfolio by net lettable area (NLA).
The 30,420 square metres of leases signed for HY23 is across 35 deals, and represents 10 of portfolio NLA. This comprised 24,285 square metres of new leases and 6,135 square metres in renewals.
Grant Nichols, COF Fund Manager and Centuria Head of Office said, “COF’s leasing activity substantiates the increasing demand for metropolitan and near-city office markets that lends themselves to affordable office accommodation, an increasing consideration from occupiers in the current economic environment.
“COF’s encouraging leasing activity runs contrary to anecdotal speculation concerning the impact flexible work may have on demand for office space. With tenants increasingly recognising the benefit offices provide to collaboration and culture, and labour demand remaining strong, we are confident that COF’s quality office portfolio will continue to attract and retain tenants.
“Moreover, research shows workspaces providing lifestyle amenities incentivise workers to return to the office and facilitates recruiting personnel. Offices with lifestyle amenities are indicative of COF’s portfolio.”
Further to COF’s significant leasing activity, many Australian office markets demonstrated positive net absorption, or an increase in leased space over the past 12 months. Much of this positive net absorption occurred in metropolitan or near city office markets, with the Melbourne Fringe demonstrating the strongest 12month net absorption of any Australian office market. Negative net absorption was concentrated in the Sydney and Melbourne CBD, markets COF has limited or no exposure to.
Property Council report shows signs of improvement in office market
The latest Property Council of Australia (PCA) office market report has been released, with the data showing signs of improvement across several capitals.
Perth, Brisbane and Hobart CBD’s all recorded reductions in the CBD vacancy rate. Perth and Hobart both improved by 20 basis points, with Brisbane down one percentage point.
Other state and territory capitals increased in vacancy rates, Canberra was up 0.3 percentage points, Sydney up 1.2 ppt, Melbourne up 0.9 ppt, and Adelaide 1.9 ppt.
Property Council WA Executive Director Sandra Brewer said while the improvement seems modest, the results in the Office Market Report are a strong indicator of underlying market resilience as an additional 13,788sqm space was added to the market in the reporting period.
“Both the Perth and West Perth markets are showing strong signs of improvement,” Ms Brewer said.
“Even with businesses adapting to hybrid workforce arrangements, what we are seeing is that the role of the office remains central to the employee experience.
“Contrary to many predictions, flexibility does not appear to be reducing demand for space. Sublease vacancy rates – often an indicator of businesses downsizing space requirements – remain low at 0.6 per cent, well below the historical average of 1.7 per cent, indicating businesses are using their whole of office space.
“We are seeing a shift from desk dominant office space, with tenants increasingly requiring more room for a superior office experience, with additions such as wellness rooms, collaboration spaces, lounges for socialising and sophisticated coffee machines,” she said.
There are more encouraging indicators that vacancy will continue to trend downwards, with strong enquiry levels reported by commercial property agents towards the end of 2022 and the start of 2023.
Colliers State Chief Executive for Western Australia Richard Cash said the positive results of the Office Market report would set the tone for a strong start to 2023 in both the Perth CBD and West Perth office markets.
“The high level of business confidence in WA is another positive sign for the broader WA economy in 2023, with national and multinational companies seeing the clear benefits in having their Australian headquarters located in Western Australia,” Mr Cash said.
