There will likely be a boom in office investment this year, with the Australian market gaining traction just as tenants are set to start looking for more space.
According to Knight Frank’s latest study, $4.9 billion has moved so far this year, with another $6.9 billion worth of stock already on the market and likely to sell in the coming months across the six major cities of Sydney, Melbourne, Brisbane, Perth, Adelaide, and Canberra.
The news comes at the same time as a JLL analysis of formal tenant briefs in the market for January and February this year showed strong tenant demand in the Sydney CBD.
According to JLL’s research of formal tenant briefs in the market for the first two months of this year, Sydney accounted for sixty per cent of all tenant briefs throughout Australia’s office markets, with thirty-two briefs recorded in January alone. This was by far the highest amount ever recorded across all Australian markets, and it was comparable to pre-pandemic levels.
When compared to 2021 statistics, the number of briefs issued in the first two months of 2022 in Sydney CBD was fewer, but the total square metre need was greater, indicating increased demand for tenants seeking larger space. The size requirements of official tenant briefs climbed forty-six per cent and fifty-seven per cent in February 2022, compared to 2020 and 2021 numbers, respectively.
The news comes as Property Council research shows workers returning to the country’s CBDs in encouraging numbers. Sydney CBD office occupancy rates increased to forty-two per cent in April, Melbourne up to thirty-five per cent, Perth to fifty per cent and Brisbane to fifty-one per cent.
According to Justin Bond, Knight Frank’s National Head of Capital Markets, overall office investment volumes in 2022 are projected to easily exceed the $16.1 billion total in 2021 across the six major cities.
“We are seeing increased levels of investment opportunities coming to the market as borders open and confidence returns to the occupier market,” he said.
“We expect volumes to reach $20 billion in 2022, up twenty-five per cent from last year, but below the record level of $25 billion reached before the pandemic in 2019.”
Bond said Melbourne is expected to see a strong year, which the most stock of any city at $3.4 billion.
This has been driven up by on-market sale of Southern Cross Towers and 1000 La Trobe.
Brisbane is expected to hit market volumes approaching $1 billion, while Perth is likely to benefit from the reopening of state and international borders.
“With just over $400 million of stock on the market, the city is also benefitting from a strong economy in Western Australia with the office market supported by rising demand for space from the mining sector,” Bond said.
|
Sydney |
Melbourne |
Brisbane |
Perth |
Adelaide |
Canberra |
6 city total |
|
|
2019 |
13,819 |
5,177 |
3,509 |
935 |
827 |
762 |
25,029 |
|
2020 |
4,746 |
2,880 |
1,456 |
282 |
564 |
81 |
10,008 |
|
2021 |
7.264 |
3,522 |
2,011 |
1,056 |
682 |
1,584 |
16,119 |
|
YTD 2022 |
2,410 |
827 |
1,114 |
13 |
353 |
153 |
4,870 |
|
On market (April 2022) |
1,392 |
3,441 |
876 |
400 |
369 |
442 |
6,920 |
Office investment volumes in major cities ($millions).