Tenants are looking for more office space in 2022

SYDNEY, 21 March 2022 – The positive leasing momentum of 2021 is flowing into 2022, with strong tenant demand in Sydney CBD showing that businesses are looking to occupy more office space.

JLL’s analysis of formal tenant briefs in the market for January and February this year shows that Sydney accounts for 60% of all tenant briefs across Australia’s office markets for the first two months of the year, recording 32 briefs in January alone. This figure was by far the highest number recorded across all Australian markets and is line with pre-pandemic levels.

In the first two months of 2022, Sydney CBD recorded a lower number of briefs issued when compared to 2021 data, however the total square metre requirement was higher, displaying increased demand for tenants looking for larger space. In February 2022, the size requirements of formal tenant briefs increased 46% and 57% on 2020 and 2021 figures, respectively.

JLL’s Head of Sydney CBD Leasing, Will Hamilton said, “We continue to see good levels of demand across smaller and larger occupiers of space, with the leasing momentum seen in 2021 continuing this year. Organisations are focusing on enhancing collaboration and providing improved amenity, which in some cases is leading to increased footprints and supporting positive demand.”

Approximately 89% of public market briefs in the month of February had a preference for fitted premises.

“Occupiers are looking to upgrade into better quality office accommodation that offers higher ESG credentials, better amenity and overall experience for their people. We expect this to remain a key theme for 2022. The continued rebound in demand likely means that effective rents have bottomed out.,” said Mr Hamilton.

Reflecting the continued flight-to-quality trend, Premium & A-Grade office space had the highest levels of tenant inquiry.

Mr Hamilton said, “Our data shows that for the Sydney CBD, tenants who came to market in January are currently seeking approximately 23,000 sqm of space to occupy, akin to pre-pandemic levels of activity. For February, the figure is estimated at a further 37,000 sqm of space, more than double for the same period two years ago.”

The Property Council of Australia’s latest Office Occupancy survey shows a consistent lift in workers returning to the office in Australia’s CBDs, with Sydney recording 18% occupancy in February 2022, in contrast to 7% in January.

JLL’s Office Leasing NSW Director, Justin Hayes said, “Sydneysiders have been presented with a number of challenges in the first few months of 2022 that have been viewed by many as roadblocks to coming back to the office. But we are now seeing activity is moving back to pre-pandemic levels. Anecdotally, we are increasingly hearing citygoers and CBD workers alike describe the city as getting busier. In speaking to the owner of King Street café Sevens Specialty Coffee, the number of coffees sold has increased exponentially since the start of the year, at an average of 15% week-on-week.

“The beginning of the year, coupled with challenges including public transport disruptions, intense weather conditions and ongoing COVID-19 interruptions have been considerable and consistent, which makes the anecdotal evidence of CBD activity and momentum that much more significant. There is an undeniable desire from businesses to be back in their offices,” said Mr Hayes.

The Australian economy has entered 2022 in a positive manner, with NSW activity rebounding strongly. The ABS national accounts revealed the Australian economy expanded by 3.4% in the December quarter and by 4.2% over 2021. The Reserve Bank of Australia forecasts the domestic economy will grow by 4.25% in 2022. 

Mr Hayes said, “Net absorption in Sydney CBD totalled 10,800 sqm over 4Q21, which is the third consecutive quarter of positive demand. The recent opening of international borders to fully-vaccinated travellers in late February will no doubt further boost activity in the Sydney CBD, particularly for organisations looking to establish a local office in the market.”