Colliers International launches H1 CBD Office Research & Forecast Report
Colliers International’s CBD Office Research & Forecast Report for the first half of 2019 has found the nation’s major CBD markets, particularly Sydney and Melbourne, are set to receive a significant boost to demand.
“Whilst the whole nation eagerly anticipated the findings of the Financial Services Royal Commission in early February 2019, the commensurate impact on the nation’s office markets was a less talked about outcome,” Anneke Thompson, Colliers International National Director of Research, said.
“However, analysis of our Tenant Advisory team’s work in progress data indicates that nationally, the finance and insurance industry now lead the work in progress – with 18% of all work being undertaken by our team Australia-wide linked to this industry.
“This data closely aligns with Job Vacancy data published by the ABS in January, which shows that finance and insurance jobs available now are at their highest level since in the series began in 2009.”
Other industries that dominate Colliers’ Tenant Advisory work in progress include the Media & Communications industry (16%), Information Technology (13%) and Manufacturing (12%) – although most of these requirements are for metro office markets. Co-working and government or government-related bodies – industries which were already taking up large amounts of space in CBD markets – represented 7% of work in progress respectively.
The implication to be taken from this data is that the major CBD markets – particularly Sydney and Melbourne, each home to two of our big four banks – are due to receive a further boost to demand, in an already tight market.
“Over the last six months we have already seen a number of financial institutions come to market for sizeable requirements where they are splitting or selling off their wealth management business. These requirements to date have been focussed on the Sydney CBD,” Simon Crouch, Colliers International Head of Tenant Advisory, said.
“ Due to this we are also expecting that these groups may need to reduce their space commitments via contraction rights or subleasing in the future. This may result into a reduction in space in some of the large pre-commitment deals completed by these groups
“ We are also seeing professional services and legal sector setting up specialist project groups as part of the Royal commission increasing space however they are looking at splitting these groups to more cost-effective suburban locations.”
“Whilst each requirement will have its own set of circumstances, by and large, we are seeing the finance and insurance industry increase employment, separating wealth departments from their main premises and reshuffling space to deal with additional regulations placed upon them.
“While we are in the early stages of this industry transformation, it seems that space occupied by finance and insurance groups will, in aggregate, increase over time. Given how few options are available to large occupiers in Sydney and Melbourne currently, the question will arise, will these occupiers start looking to alternative locations to house non-core departments?”
Mr Crouch said Colliers International was already seeing the early signs of groups in the finance and insurance sector enquire on cost and availability in non-traditional markets such as Adelaide and suburban markets in Sydney.
“We expect that in the longer term, demand from these groups will spread further from the Sydney and Melbourne CBDs, as cost and space availability become fundamental issues,” he said.
Colliers International’s Office Leasing team recorded more than 200 enquiries for office space, averaging around 740sqm per tenant, from the Finance, IT and Property Services industries in 2018.
“In 2018, we started to see an increase in requirements off the back of the Royal Commission,” Simon Hunt, Colliers International Managing Director of Office Leasing, said. “With increased regulations in addition to banks considering split operations, we expect the Finance Industry will record a strong number of transactions over 2019.”