Nationally, the market recorded a total of 3,254 enquiries for over 2.8 million sqm of office space in 2020, which was a three per cent increase on the number of enquiries and nine per cent increase on the area enquired for when compared to the previous year.
Data for the index was compiled from office leasing agents, market knowledge and the investment management company’s database from 2020 and 2019.
See a breakdown of major capital cities below.
Sydney CBD
Despite the challenging market in 2020, demand for office space in the Sydney CBD increased on from the year earlier – a total of 542 enquiries for over 550,000sqm was recorded last year compared to 510 enquiries for over 521,000sqm of office space in 2019.
The finance and government sectors saw the biggest uplift in demand from 2019, with legal, media and retail sectors also experiencing and increase in demand.
“While enquiry levels were high, there was very little new direct leases being executed in 2020 with most enquiries either staying within existing premises (often on short or flexible lease terms) or relocating into fitted out sub-leases,” the report explained.
“We expect the direct leasing market will become more active in 2021 as landlords with vacancy become more flexible with the terms they’re prepared to offer, and higher incentives make the case for a relocation on a long-term basis more attractive.
“The availability of sub-lease space will peak in 2021 and some tenants that currently have space on the market are expected to elect to take it back if the economy expands and confidence continues to improve.”
Sydney’s CBD
Melbourne CBD
The Melbourne CBD market recorded over 442,000sqm of enquiry for a total of 420 enquiries in 2020, which is a one per cent increase on
the number of enquiries from 2019 and an eight per cent decrease on the area.
Melbourne’s government sector contributed to the majority of this demand with over 159,000sqm worth of enquiry attributed to this sector, which is up from only 39,000sqm in 2019
Other sectors that saw an uplift in demand in 2020 compared to 2019 were the engineering, media and pharmaceuticals industries.
Two of the largest leasing transactions in 2020 included Herbert Smith Freehills commitment to approximately 10,287sqm at 80 Collins South Tower on behalf of Dexus and Myer’s commitment to approximately 11,074sqm at 1,000 La Trobe Street on behalf of Poly Group – both secured in early 2020 prior to the full impact of the COVID-19 pandemic being felt across the Australian office market.
“Conditions in the Melbourne CBD market are expected to remain challenging for the duration of 2021,” predicted the report.
“We expect businesses to initially focus on their return to work strategies and caution will remain until the State Government advises that it is safe for businesses to return to the office at full capacity.
“Businesses that do have the confidence to proceed with leasing commitments in 2021 are likely to secure highly favourable and flexible commercial terms that have been unseen in recent years and may not be repeated.”
Melbourne’s CBD
Brisbane CBD
The Brisbane CBD market has seen a sharp decline in enquiry in 2020 compared to 2019, with 96 enquiries for over 69,000sqm recorded in last year – 138 enquiries for over 188,000sqm were recorded the year earlier.
This decline has been due to a pause in requirements by larger businesses seeking space over 3,000sqm; in 2020 only two requirements for over 7,000sqm in total were recorded for this sector compared to 10 enquiries for over 111,000sqm in 2019.
The drop in demand was also from the insurance, legal, government and finance sectors holding on their commercial real estate needs.
“In 2021 we are expecting an increase in overall demand particularly from larger occupiers as they activate their requirements which were put on hold in 2020,” the report explained.
“A preference for fitted space is likely to continue as tenants look to extract maximum value from the deal whilst also seeking shorter or flexible lease terms allowing them to manage fluctuations in business conditions over the short to medium term.”
The only new supply to be added to the market in 2021 is Midtown Centre, which is over 50 per cent committed by Rio Tinto and the Queensland government.
Brisbane CBD
Adelaide
The Adelaide market had a stable year in terms of demand for office space, with 2020 Q4 providing a peak uplift in demand for the first time since 2013 – normally enquiries are at their highest in Q1.
There was 138,000sqm of demand from businesses seeking office space over 3,000sqm, which was more than the 130,000sqm of demand in H1 and 114,000sqm of demand in H2 2020.
The government sector was responsible for most of this demand with over 80,000sqm recorded in 2020, compared to 42,000sqm in 2019.
An uplift in enquiries from the consulting, education, engineering, pharmaceutical and retail sectors saw the mid-sized sector provide more demand than it did in 2019.
“We are expecting some major announcements around new developments following formal precommitments that could see 115,000sqm come online in 2023 – in addition to the Cbus Property 30,000sqm project at 83 Pirie Street,” the report read.
“This will influence dynamics in the market, opening up opportunities for occupiers that may have felt they were lacking previously.
“Attention to detail in 2021 will be key to determine relevant strategies whether on the supply or the demand side.”
Cbus Property’s 83 Pirie in Adelaide’s CBD.
Perth
When we compared year-on-year figures, Perth recorded a total of 396 enquiries for just over 207,000sqm of office space in 2020 compared to 404 enquiries for over 208,000sqm the year earlier.
Demand from larger businesses seeking space over 3,000sqm increased year on year, as did small businesses seeking space under 1,000sqm.
Although enquiry levels throughout the back half of 2020 were encouraging, transactions across the CBD market were down almost 50 per cent, when compared with 2019.
“This was predominantly driven by many of the tenants that came to market, opting to renew their existing lease rather than relocate,” the report explained.
“Importantly for landlords, a significant portion of these tenants opted for short term renewals, which is expected to result in increased demand for office space throughout 2021 and 2022.”
Perth CBD
Canberra
The Canberra market experienced a decline in demand each quarter during 2020, with the be office space continuing to be underpinned by the commonwealth government.
The largest impact on demand drivers was there were no enquiries for over 3,000sqm recorded in Q4 2020, compared to every other quarter recording a high number of enquiries.
Collin’s believe impacts of the COVID-19 pandemic has seen many businesses pause their real estate decisions, which is shown in the decrease per size segment on the enquiries.
The most notable transactions that occurred in the market during 2020 were the recommitment by Services Australia in Greenway (3,741sqm), Department of Industry in the CBD (8,011sqm), the Civil Aviation Safety Authority in Phillip (8,254sqm) and the Department of Defence in the CBD (7,200sqm).
“In 2021 there is expected to be a strong uptick in deal flow across the board,” the report explained.
“There are a number of eagerly anticipated major Commonwealth Government processes that are due to be made during 2021 including (Australian Tax Office – 32,000sqm, Department of Defence – 65,000sqm, Services Australia – 18,200sqm and Department of Education – 65,000sqm).”
