Australia’s economy has been resilient once again and outstripped previous forecasts of the economic recovery following the Delta outbreak. 2022 will see some challenges ahead with continued inflationary pressures and the likelihood of more than one cash rate rise, possibly starting as early as mid-year.
Despite this, Australia’s office markets are coming off of a solid rebound in office investment activity in 2021, from the lull in 2020. We anticipate Q2 of 2022 investment activity will rebound to 2021 levels, given the delayed start in deals coming to market in 2022. The rebound in labour markets already witnessed, coupled with a clear flight to quality thematic driven by a return to office and high demand for ESG criteria, is a further positive sign to support further lease activity through 2022.
The growing certainty around these fundamentals will underpin the continued recovery in office investment activity over 2022 after already reporting a 70% uplift in volumes over 2021. The flight to quality thematic will see more capital look to be placed towards high quality prime office buildings that offer talent attracting amenity and location and strong ESG credentials, but will put pressure on poorer quality, secondary assets. However, this will provide an opportunity for secondary asset owners or opportunistic investors who are willing to spend on refurbishment activity to position these assets as a competitive option within the grey area between upper-B grade and lower A-grade assets. We expect demand from global capital will continue to grow given the relative value of the Australian market and comparable yields in other global hubs.
Despite this, Australia’s office markets are coming off of a solid rebound in office investment activity in 2021, from the lull in 2020. We anticipate Q2 of 2022 investment activity will rebound to 2021 levels, given the delayed start in deals coming to market in 2022. The rebound in labour markets already witnessed, coupled with a clear flight to quality thematic driven by a return to office and high demand for ESG criteria, is a further positive sign to support further lease activity through 2022.
The growing certainty around these fundamentals will underpin the continued recovery in office investment activity over 2022 after already reporting a 70% uplift in volumes over 2021. The flight to quality thematic will see more capital look to be placed towards high quality prime office buildings that offer talent attracting amenity and location and strong ESG credentials, but will put pressure on poorer quality, secondary assets. However, this will provide an opportunity for secondary asset owners or opportunistic investors who are willing to spend on refurbishment activity to position these assets as a competitive option within the grey area between upper-B grade and lower A-grade assets. We expect demand from global capital will continue to grow given the relative value of the Australian market and comparable yields in other global hubs.
