Colliers sees spike in leasing transactions, demand for space YTD 2021
The Government, Finance and Health and Community Services sectors are driving a spike in leasing deals being done in major office markets nationally, according to new data from Colliers.
The national outlook for Australia’s office markets shows green shoots despite the disruption of Covid-19 restrictions in the country’s two biggest capital cities, Sydney and Melbourne.
Colliers’ year-to-date office data found the company’s leasing experts have negotiated 679 deals for 356,162sqm of office space nationally since the beginning of the year.
This is a 64% increase in the number of transactions when compared to the prior year and a 40% increase on the area. The Government sector has transacted the most space year to date, with the Finance and Health and Community Services sectors responsible for the greatest volume of deals.
The highest volume of deals, YTD, occurred in the Sydney CBD (142 deals) and Melbourne Metro (121 deals) markets. This was followed by the Melbourne CBD with 87 deals and the Brisbane Metro market with 66 deals.
In the month of August alone, Colliers facilitated 111 deals spanning 81,690sqm. This compares to 68 deals spanning 40,201sqm in August 2020; 80 deals totalling 39,794sqm in August 2019; and 73 deals covering 81,806sqm in August 2018.
Simon Hunt, Colliers’ Managing Director of Office Leasing, said a strong level of enquiry gathering pace from the end of 2020 and into the first half of 2021 in CBD markets nationally had started to convert into a pick-up in leasing activity in the second half of 2021.
“Current Sydney and Melbourne restrictions may delay some decisions in the near term, however, the momentum gained over the first half of 2021 and the confidence of overall market conditions means that this is more of a momentary delay as opposed to any activity being placed on hold indefinitely,” he said.
“We are certainly seeing very encouraging levels of enquiry from businesses across many of our major CBD markets, with 2,614 enquiries for a total 2,014,922sqm of office space recorded for August YTD 2021.
“This is a 16% jump on the number of enquiries for the same period last year and 2% up on the area enquired when compared to August YTD 2020.”
Mr Hunt said businesses in some sectors were making moves to get back to a level of 'business as usual', including making property decisions which may have been previously delayed in 2020.
“What we have seen this year is, despite new outbreaks and lockdowns, there is a bit more optimism about the resiliency of the business sector in those industries where restrictions have had less of an impact on operations,” Mr Hunt said.
“Our deal data does show, however, that industries that we know to have been the most affected by the pandemic and all the restrictions that have come with it – such as tourism and arts and entertainment, are in a very different position.”
Paul Bezzina, Group General Manager, Leasing & Agency Services, Mirvac, said there remained a strong role for office but there was no question that the purpose of the office had evolved.
“We need to think differently about the spaces and places we create, increasing our focus on experience, augmenting the best-in-class physical space we already deliver,” Mr Bezzina said. “The demand for space hasn’t changed, but the way we use it certainly has.
“The extended COVID-19 lockdown has accelerated the rise of a hybrid workforce and the omni-channel worker, and this has caused tenants to reassess what they are demanding from their buildings, including greater focus on quality amenity, flexible space, health and wellbeing, and cutting-edge technology.”
During FY21, Mirvac leased more than 41,000sqm of space across its existing portfolio. With more than 12,000sqm of space currently under offer across the portfolio, Mr Bezzina said early indications were that activity this year could be stronger than last year.
“We are hearing from many of our tenants, and across the broader market, that there is an excitement to get back to the office,” he said. “While employees enjoy flexibility, they are also craving the connection, collaboration, and sense of community that a physical office provides.
“Technology is an enabler and has allowed us to seamlessly transition to remote work, but it cannot replace the importance of face-to-face interactions when it comes to culture, innovation, and productivity. This has become even more evident during 2021’s lockdown.”
Mr Bezzina said the demand for quality office space had never been more evident.
“Tenants are seeking out a new breed of workplace that integrates thoughtful design, innovative technology, and quality placemaking through flexible office fit out, retail, hospitality and end-of-trip offerings to deliver a welcoming and exciting environment for employees,” he said.
“Brisbane is a great example of the strength of the market for quality office assets. Our 80 Ann Street precinct, developed with agile working front of mind and best-in-class credentials for sustainability and health and wellbeing, has seen strong demand and interest from the market.
“Employees are demanding more from their workplace and want to come to a destination that excites and inspires them.”
Breaking down its YTD August 2021 enquiry data, Colliers found the Brisbane CBD, Gold Coast and Sydney CBD markets have been the nation’s hot spots for tenant demand in 2021 – all experiencing more enquiries for a greater amount of space in August YTD 2021 than July YTD 2020.
In particular, the Sydney CBD market has seen an additional 252 enquiries compared to the same period last year, for approximately 144,000sqm more space.