Office sublease market shows improvement

Office sublease market shows improvementSydney and Brisbane have recorded declines in sublease space, while increases have occurred in Melbourne, Perth and Canberra, a new report shows.According to CBRE’s latest Sublease Barometers, which tracks the volume of sublease space, Brisbane has shown the most improvement in the sublease office market. The capital city recorded a 19 per cent reduction in available space in the third quarter of 2014, and its sublease availability dropped to 64,405 sqm, its lowest level in 12 months. Also showing improvement was Sydney, which saw its lowest point since 2011, with available space dropping to 38,725 sqm. In Brisbane, CBRE said major drivers of the decline included commitments by Suncorp to approximately 7600 sqm of former Rio Tinto space at 123 Albert Street; RungePincockMinarco to 2422 sqm of former Queensland rail space at 295 Ann Street and Bluesky to 1499 sqm of former Ernst and Young space at 111 Eagle Street.”Declines in sublease are directly linked to the quality of the fitout available in the sublease options,” said Andrew Tracey, CBRE’s regional director of office services. “Space with a good fitout moves well, while sublease space with an old fitout tends to only move as short-term project space.” Tracey noted further that the market in Brisbane remained highly competitive in both direct and sublease markets.In contrast, Melbourne has reported the highest volume of available sublease space in Australia, reaching 79,961 sqm. Canberra recorded the biggest increase, hitting 42,240 sqm of available space, a situation CBRE attributes to a reduction of the headcount in several federal government departments. Meanwhile, Perth saw a slight increase in available space to 65,695 sqm. Tracey pointed to the significant divergences between the capital cities with respect to market influencers and future forecasts. “The majority of the sublease space in Sydney is concentrated in the sought-after CBD core in premium and A-grade space, which represent the most appealing options for incoming tenants,” Tracey said.”In addition, a large proportion of the lease expiries are post-2017, suggesting that landlords will remain willing to negotiate new direct deals with interested tenants.”However, Tracey said Melbourne’s 6.4 per cent third-quarter increase in sublease stock was not necessarily reflective of the market, noting its connection to a number of large new sublease options such as the 12,984 sqm of AGL sublease space being marketed at 120 Spencer Street in advance of the company’s relocation to Docklands.”If AGL was removed we would be seeing the same downward trend that is being experienced in Sydney,” Tracey said, arguing that contraction remained the key motivation driving sublease availability in Melbourne as businesses continued to focus on cost saving mandates.