Home Property Australia Office sublease volume climbs

Office sublease volume climbs

  • November 03, 2020

Sublease space in Australia’s major office markets has jumped by more than 30 per cent nationally in the third quarter to reach a new peak of 352,768 sqm, according to CBRE.

 

  Three key takeaways:

  • CBRE’s September 2020 Sublease Barometer report finds sublease volume now represents 2% of the country’s total office stock
  • Prime grade office stock has been most vulnerable to rises in sublease space, accounting for 80% of volume
  • Mark Curtain, CBRE’s head of office leasing for Pacific, says market activity is slowly improving each month, but expects sublease space to edge even higher in the months ahead.

 

“The landscape of Australia’s office market has changed significantly in 2020, with occupiers shedding space that was earmarked for growth,” Curtain says.

“As tenants rightsize their business for the anticipated economic conditions ahead, vacancy in the sublease market has grown to represent two per cent of Australia’s office market.”

Prime grade office stock accounts for 80 per cent of volume, with contraction the biggest driver of new sublease space during the three months to September. About two thirds of available space is a result of occupiers downsizing their office footprints.

Large tenancies spanning more than 2,000 sqm make up the bulk of sublease options in the market (70%). Financial and insurance services are the biggest sublessors, followed by professional services and information media and technology.

Sublease volume in Sydney surged 56 per cent in the third quarter to reach 164,950sqm – its highest level since 1992. In Melbourne, sublease availability lifted 46 per cent over the quarter to 93,257 sqm – a new seven-year high – despite Melbourne coming off a historically low vacancy rate.

Brisbane’s office market, meanwhile, has bucked national sublease trends, recording a six per cent decrease in the amount of space, to 44,600sqm, available during the third quarter. This was mainly driven by Virgin Australia’s commitment to lease 8,300 sqm in South Brisbane.

Perth’s office market has remained relatively resilient, with just a 2.2 per cent increase in sublease volume in the third quarter. While Adelaide recorded the largest spike in sublease activity, with a 117 per cent increase, the total sublease volume remains just over 13,000 sqm.

Joyce Tiong, CBRE’s head of office occupier research, says “continued cost-cutting by businesses and persistent economic headwinds” will see occupiers seek greater lease flexibility to accommodate “a ‘flex up’ or ‘flex down’ workforce”. Occupiers are also looking to cater to “employee expectations for a ‘more than a workspace’ environment”.