Australia’s office markets finish 2021 in a positive manner

AUSTRALIA, 20 January 2022 – JLL Research has released 4Q 2021 statistics on national office markets. The figures showed positive net absorption of 62,900 sqm was recorded across CBD office markets in 4Q21 and 84,300 sqm over 2021.

The national CBD office market vacancy rate contracted by 0.4 percentage points to 13.7% in 4Q21.

JLL Head of Research – Australia, Andrew Ballantyne said, “The Australian labour market has proven to be very resilient with business surveys pointing towards robust employment growth over 2022.”

“Historically, employment growth has proven to be a lead indicator for office sector demand. While the evolution of working practices will have implications for workplace design, our positive net absorption figures show that a number of organisations are increasing their footprint to accommodate headcount growth,” said Mr Ballantyne.

The metropolitan office markets had a strong recovery with net absorption of 339,000 sqm recorded over 2021. The strongest performing metropolitan office markets were the Melbourne Fringe (+105,300 sqm), Parramatta (+90,100 sqm) and Melbourne South East suburbs (+89,000 sqm).

JLL Head of Office Leasing – Australia, Tim O’Connor said, “Leasing enquiry and activity accelerated across most office markets over the second half of last year. We track 19 CBD and metropolitan office markets across Australia and 16 of them recorded positive net absorption in 2021.”

The Sydney CBD recorded 10,800 sqm of net absorption in 4Q21 and 29,700 sqm over 2021. As a result, the Sydney CBD vacancy rate fell by 0.5 percentage points to 12.5% in 4Q21.

Mr O’Connor said, “As Sydney emerged from its Delta lockdown in October, we saw a level of pent-up demand and a willingness to commit to new leases. While a diverse range of industry sectors were in expansion mode, most organisations seeking additional office space have increased their tech-related headcount.”

The Melbourne CBD recorded a third successive quarter of positive net absorption in 4Q21 (+12,700 sqm). However, the headline vacancy rate remained elevated at 15.0%.

Mr O’Connor said, “Leasing market sentiment improved in the Melbourne CBD over the latter part of 2021. A number of smaller organisations delayed decision-making over the past 12 months and we expect to see strong activity in the sub 500 sqm cohort of the market in 2022.”

The Brisbane CBD recorded 11,800 sqm of net absorption in 4Q21 – the strongest quarterly result since 4Q19. As a result, the headline vacancy rate compressed by 0.3 percentage points to 15.5%.

Mr O’Connor said, “Queensland has been a beneficiary of interstate migration patterns and this is positive for the local economy and business growth. Furthermore, the Brisbane Olympics will lead to new infrastructure projects and increased demand from consultancy and engineering firms.”

The Adelaide CBD recorded 11,900 sqm of net absorption in 4Q21 and 17,700 sqm in 2021 – the highest annual result since 2017. The headline vacancy rate compressed to 15.6% over the quarter. Leasing activity is concentrated in better quality assets and prime grade vacancy tightened to 11.9% in 4Q21.

Mr Ballantyne said, “The Adelaide CBD office market is expected to see strong leasing activity in 2022. There are a number of active enquires from defence related organisations and we continue to see expansion from small and mid-sized technology firms.”

Canberra recorded 15,600 sqm of net absorption in 4Q21 and 35,800 sqm over 2021. The Canberra vacancy tightened even further to 5.7% in 4Q21.

Mr Ballantyne said, “The Canberra office market has shown its counter-cyclical characteristics through the pandemic. While the public sector has contributed to positive take-up, we continue to see strong leasing activity from smaller private sector organisations.”

The Perth CBD had a zero net absorption result for a second successive quarter and vacancy was unchanged at 19.1%.

Mr O’Connor said, “Leasing enquiry and activity accelerated over the latter part of 2021 and will continue through 2022. New COVID-19 strains slow decision-making, but most organisations are expecting to transition from a pandemic to an endemic and willing to make long-term real estate decisions.”

“Organisations are gravitating towards higher quality office assets with strong ESG credentials. Space availability in office assets less than 10 years old is limited and we expect to see new pre-commitment enquiry emerge over 2022,” concluded Mr O’Connor.

Australian CBD Office Markets, Vacancy Rate by Grade

_{Source: JLL Research}

Australia office markets net absorption, 2021

_{Source: JLL Research}