Office demand and leasing activity continues to thrive

Colliers International launches latest Office Demand Index

Australia’s major office markets are set for a strong start to 2018 on the back of increased demand and activity in 2017.

According to Colliers International’s latest Office Demand Index, office markets nationally recorded a 19% year-on-year increase in enquiry from 415,737sqm in Q4 2016 to 492,947sqm in Q4 2017.

Simon Hunt, Colliers International Managing Director of Office Leasing, said increases were seen across all segments of the market.

“At the smaller end of the market, we recorded a 14% increase in demand for office space up to 999sqm,” he said. “In the mid market (1,000-2,999sqm), we saw an 18% increase in enquiry and for larger enquiries, above 3,000sqm, we recorded 22% growth in demand at the conclusion of 2017."

In the Sydney CBD, Colliers International recorded a 6% increase in demand for office space to 185,555sqm in Q4 2017, up from 174,330sqm in Q4 2016.

Brisbane saw a significant 173% overall growth in enquiry from 15,575sqm in Q4 2016 to 42,555sqm in Q4 2017, driven by an increase in larger companies enquiring for 1,000sqm-plus tenancies. The Melbourne CBD saw a slight decrease of 9% overall in the fourth quarter of 2017, but recorded a 46% increase in demand for small office suites under 1,000sqm.

Mr Hunt said the increase in demand for office space nationally had also translated to a small jump in the number of leasing deals done in 2017.

“We recorded a total of 942 deals for 785,253sqm of office space in 2017,” he said. “In comparison to the full year of 2016, this is a 1% increase on the total number of deals and an 11% increase on area transacted."

2017 concluded with a flurry of leasing activity across major markets. One of the most notable transactions achieved in December 2017 was at 72 Christie Street in Sydney, where Mastercard leased 7,227sqm. Colliers International’s Lisa Treble and Michael Arcus were the leasing agents on behalf of Anton Capital.

In Melbourne, Monash College secured 41,418sqm at 750 Collins Street in Docklands in a deal negotiated by Colliers International’s Andrew Beasley on behalf of The GPT Group.

In Brisbane, Origin Energy leased 16,329sqm at 180 Ann Street in the largest office leasing deal of 2017. Colliers International’s Matt Kearney and Mark McCann (now of Knight Frank) were the leasing agents on behalf of Daisho Co. Ltd.

The major movers throughout 2017 were tenants within the Business Services, Education & Training, Finance and Government sectors. The average size of a tenant moving within the Business Services industry was around 500sqm compared to the Education & Training industry, where there was an average tenancy size of 1,800sqm.

Tim Farley, Colliers International National Director of Tenant Advisory, said a significant amount of recent sub-1,000sqm tenants have been attracted by an increase in freshly fitted out suites being offered by landlords.

“Whilst newer buildings are trending towards larger and more efficient floorplates, B-Grade and aging Prime Grade assets are being repositioned with an array of smaller tenant offerings with the benefit of shared facilities to provide greater flexibility,” Mr Farley said.

“Start-ups and small businesses are taking advantage of landlords integrating speculative fitted suites into their assets, offering flexible lease terms and removing the otherwise crippling effect of CAPEX that has historically served as a barrier to transact.

“On a national level, we are seeing larger businesses expanding their footprint as a result of continued growth or consolidation of premises, whilst workplace methodology and clever design is able to reduce the amount of space required through achieving greater efficiency.”

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