NEWS

Enquiry for office space remains strong despite tightening market

Colliers International releases Q2 2017 Office Demand Index

Year-to-date enquiry for office space across major Australian markets remains strong for 2017, despite some tightening and a declining vacancy rate, according to Colliers International’s latest Office Demand Index.

Nationally, the office market remains buoyant, with a total of 416 deals and 336,062sqm transacted in the six months to July, which is a six per cent increase on the total number of deals and a 14 per cent increase on the area transacted in the same period last year.

A three per cent increase in total office area and a five per cent increase in total enquiries were recorded year to date when compared to the six months to July 2016. Quarter-on-quarter figures show a slight drop in demand by five per cent when comparing Q2 2016 to Q2 2017 – however, the demand recorded in Q2 2017 remains the third-highest recorded for one quarter during the past four years.

Colliers International’s national director for Office Leasing, Cameron Williams, said that although the markets were tightening in the Melbourne, Brisbane and Sydney CBDs, there was still an uplift in demand for office space, which remained strong compared to other quarters.

“We’re entering a new market landscape compared to what we have experienced during the past few years, with limited stock availability and demand remaining strong,” he said.

Stock withdrawals in the Sydney CBD have slowed demand for office space during the first half of 2017 but underlying demand remains robust, with a rise in the number of enquiries for office space more than 3,000sqm between Q1 and Q2.

Mr Williams said the number of national enquiries for all market segments, including less than 1,000sqm, between 1,000-2,999sqm and more than 3,000sqm had experienced an increase when compared to the past four years.

“Year to date we have seen a slight drop in the area enquired for in the 3,000sqm-plus segment,” he said.

“That said, the amount of area is still more than the first half of 2015 and 2014, and even though more businesses have enquired for office space more than 3,000sqm, the reason the amount of area is down on last year is likely in relation to them seeking space efficiencies due to changing workplace trends.”

Mr Williams said demand for metro office markets in Melbourne and Sydney had also increased from last year, speculating that this could be due to limited CBD options, the need to decentralise, or the growing popularity of city-fringe locations.

Colliers International’s Luke Dutton, director for Tenant Advisory, said that in Sydney and Melbourne, where occupancy costs were rising, tenants were increasingly seeking to improve efficiencies within their workplace.

“Tenants are embracing this as a means of combatting higher occupancy costs, with the target outcome to reduce their overall footprint,” he said.

“The reported reduction in size within the 3,000sqm-plus segment of transactions is indicative of businesses seeking to reduce fixed costs by reducing their footprints where possible.”

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