New Data Shows Strong Demand For Office Space In NSW CBDs

Demand for commercial office space has held strong with investors and tenants across NSW, despite four months of lockdowns and an additional two months of work from home orders by the NSW Government.

Half yearly data released today in the Property Council of Australia’s Office Market Report reveals strong demand for office space, with vacancy rates remaining steady at a globally enviable 9.3 per cent.

The Report also shows one third of the national supply of office stock due to be delivered in CBDs in 2022, will be delivered in Sydney.

Property Council NSW Executive Director Luke Achterstraat said demand for office space had increased in CBDs right across New South Wales in the past six months, including Sydney, Parramatta, Newcastle and Wollongong.

“Contrary to many predictions, the office is not dead, in fact it's even more in-demand than previous reports,” Mr Achterstraat said.

Additionally, the positive demand for Sydney office space is being led by a flight to quality, with most interest in Premium and A grade office stock.

“The missing piece of the puzzle now, is the return of office workers, who are critical to the revitalisation of CBDs,” he said.

Mr Achterstraat said Public Health Orders urging people to work from home where possible since 27 December 2021 were a response to the emergence of Omicron, however once the immediate health threat has eased, governments and businesses alike needed to redouble their efforts to bring life back to the city.

“It is critical for the livelihood of our CBDs that office workers are allowed to and encouraged to rediscover the energy and joys of working in our cities and with colleagues. It is vital this starts with leadership from the top – the return of public sector workers,” Mr Achterstraat said.

“Sydney and NSW more broadly are primed to attract global businesses and talent, offering top-quality premium office stock, amenities, and attractive lifestyle and working conditions,” he said.

Analysis – Sydney CBD market, January 2022

Headline comments:

  • Sydney CBD vacancy remained steady over the period
  • Demand was still positive overall
  • Negative demand was concentrated in the lower grades of space
  • There is a significant amount of space in the pipeline to be delivered in 2022

Vacancy analysis:

  • Vacancy in the Sydney CBD office market remained at 9.3 percent
  • There were 33,555sqm of supply additions and 20,477sqm of withdrawals
  • Demand was still positive, with 7,812sqm of net absorption recorded

Premium:

  • Vacancy decreased from 5.5 percent to 4.9 percent
  • This was due to 8,070sqm of net absorption

A Grade:

  • Vacancy decreased from 11.4 percent to 10.8 percent
  • This was due to 10,942sqm of net absorption

B Grade:

  • Vacancy increased from 9.4 percent to 11.3 percent over the period
  • This was due to 33,555sqm of supply additions
  • Demand was still positive, with 4,909sqm of net absorption recorded

C Grade:

  • Vacancy decreased from 10.7 percent to 10.1 percent
  • This was due to 20,477sqm of withdrawals
  • Demand was negative, with -15,712sqm of net absorption recorded

D Grade:

  • Vacancy increased marginally from 8.4 percent to 8.6 percent

Future supply:

  • 178,760sqm of new stock is due to enter the market in 2022
  • This will be followed by 7,772sqm in 2023
  • 91,000sqm is due to come online from 2024 onwards
  • A total of 146,241sqm of space is mooted

Key market indicators, Sydney CBD (aggregate)


Media:  Aidan Green | E: [email protected]