Commercial News » Sydney Edition | By David Barley | November 4, 2021 8:00 AM ET
Global property consultant CBRE is reporting this week that office sublease availability across Australia's major cities has fallen to the lowest level in a year, despite prolonged lockdown restrictions in Sydney and Melbourne.
CBRE's Q3 2021 Sublease Barometer shows that the availability of sublease space across the CBDs of Sydney, Melbourne, Perth, Brisbane and Adelaide declined by 9.4% quarter on quarter (q-o-q) to just over 344,000sqm after peaking in January at 428,600sqm.
Sydney has been the biggest mover, following a 20.9% q-o-q decrease, with even Melbourne - the Australian city most impacted by lockdowns - recording a 1.6% decline in availability.
CBRE's Pacific Head of Office Leasing Mark Curtain noted, "Despite extended lockdowns in Australia's two biggest office, the national sublease market continued to recover during Q3 underpinned by some major stock withdrawals, a slowing in new sublease availability and an uptick in sublease transactions. Overall, we expect sublease availability to continue to decline in most markets over the coming months as occupier demand increases and as tenant contraction begins to ease."
CBRE's Barometer shows that Brisbane's sublease availability has hit its lowest point since August 2020, while the availability in both Perth and Adelaide is at the lowest level since prior to the pandemic.
Melbourne continues to have the highest amount of sublease space, representing 54% of the national availability, however strong deal activity is expected to support a steady decrease in supply throughout 2022.
CBRE Senior Research Analyst Nick Baring said, "National sublease additions have plateaued throughout 2021 and industries that have experienced large contractions, such as Financial Services, have seen net absorption improve year on year. Vaccination rates are continuing to increase, enabling greater business continuity, and this, combined with expansionary activity amongst small-to-mid-sized occupiers and public sector tenants, will help support a further decline in sublease availability throughout 2022."
Tim Courtnall, CBRE Senior Director - Office Leasing, NSW states, "During Q3, we have seen downward pressure on sublease space, mainly due to transactions - with 13 sublease deals negotiated over the period - coupled with the withdrawal of sublease space by major finance and professional service organizations.
"Good quality fitted out sublease space located in the core is still attracting the most interest, especially from growing technology companies who are looking to secure office space after the end of lockdown as they experience strong headcount growth.
"Most the available sublease stock is concentrated in 2,000sqm+ tenancies, however the proportion has decreased from 76.2% in Q2, to 57.1% in Q3, following some large withdrawals from the market.
"Contraction was still the main motivation for sublease listings in Q3 and accounts for approximately 54% of the available tenancies."
Ashley Buller, CBRE Head of Office Leasing, Victoria alo comments, "The Southern Cross precinct of Melbourne has the largest percentage of the newest and best quality sublease space in the Melbourne CBD.
"Many of the largest sublease deals in the last 18 months have transacted in and around this pocket and we forecast this will continue until supply is exhausted.
"A new trend we are now seeing is that the companies offering older sublease opportunities, which have been on the market for some time, are now pivoting purely towards cost recovery and are offering exceptionally attractive terms to derive income before the lease expiry.
"Melbourne still holds the unenviable position of leading the nation on the total amount of sublease space available, but positive signs are emerging.
Chris Butters, State Director - Office Leasing, Queensland says, "Sublease vacancy in Brisbane is continuing to decline, with opportunistic tenants absorbing better quality opportunities and a series of major corporate occupiers withdrawing floors from the sublease market as they factor in future growth in occupancy levels.
"Looking forward to 2022 we do not forecast a rise in sublease volumes as the market continues to stabilise and macro-economic conditions improve.
"With minimal restrictions throughout Q3, sublease availability reduced by 15.7% q-o-q to 26,000sqm - the lowest level since August 2020.
"Availability continues to be concentrated in 2,000sqm+ tenancies, representing 86.5% of the city's sublease space."
Michael Pfitzner, CBRE Senior Director - Office Leasing, South Australia tells THE WPJ, "The sublease market continues to diminish in Adelaide with no new space entering the market in Q3
"Take up of the sublease space that is on the market remains strong as tenants continue to seek fitted out space with lease term flexibility. Additional sublease space is not expected to be added to the market in the short-term.
"Sublease availability decreased by 31.2% q-o-q to approximately 8,540sqm."
Andrew Denny, Senior Director - Office Leasing, Western Australia says, "Overall sublease availability in the Perth CBD market is minimal, although there is now one major new addition to the market of 10,000sqm at the nearly completed Capital Square Tower 2 building. This alone accounts for 29% of all sublease availability.
"With minimal COVID cases and Western Australia avoiding lockdowns throughout the majority of 2021, sublease availability has declined to 34,700sqm - the lowest level since June 2020.
"The decrease has been a result of multiple withdrawals from the market, as well as some sublease transactions.
"Information Media and Telecommunications and the Mining sectors continue to be the primary drivers of sublease availabilities, however there were three withdrawals across these sectors throughout the quarter. "