Home Property Australia Tech woes push sublease space up slightly

Tech woes push sublease space up slightly

  • March 22, 2023
  • by Property Australia
Mark Curtain, Pacific Head of Office Leasing, CBRE

The national supply of office sublease space has experienced a slight increase in early 2023, largely thanks to cost containment measures taken by the Information, Media & Technology (IMT) sector, with Melbourne and Sydney making notable contributions.

According to CBRE’s latest Sublease Barometer, national sublease space volumes have grown by three per cent this year, totalling 255,000sqm. The IMT sector was the primary factor behind the 7,000sqm increase.

“The IMT sector has recorded the largest increase in sublease availability over the past 12 months, partly due to recent cost cutting in the sector, particularly as it relates to headcount reductions. IMT firms have also been more likely to adopt hybrid working and therefore may still be offloading excess space,” CBRE’s Australian Head of Office Research Tom Broderick said.

Around 139,065 workers across 502 tech companies have been made redundant in 2023, according to the headcount live tracker at Layoffs.fyi.

While much is this is primarily in the United States, thousands of Australian tech workers have been laid off in recent months.

On the other hand, CBRE’s data reveals that the finance and insurance sector has maintained relative stability, while professional services companies, especially law firms, have offered a smaller portion of sublease space, with a reduction of 40 per cent.

According to Mark Curtain, CBRE’s Pacific Head of Office Leasing, the total amount of national sublease space is still 40 per cent lower than the early 2021 peak, with only minor increases in Sydney and Melbourne’s city centers.

“These markets are more exposed to the financial and tech sectors, which have been experiencing cost containment pressures in the current environment. Australia’s smaller CBD markets have meanwhile recorded higher physical occupancy levels throughout 2022, which has put less pressure on tenants to offload space,” Mr Curtain said.

In Melbourne’s CBD, sublease availability has increased the most this year to 122,000sqm, up 2.2 per cent from a year ago, which is 2.4 per cent of the city’s entire office stock.

The rate is still well below the late 2020 peak of 171,000sqm, which accounted for four per cent of total stock at the time. The finance sector has the highest amount of sublease space available, totaling 42,000sqm.

In the Sydney CBD, there are currently 104,000sqm of sublease space available, which is two per cent of the city’s office stock.

Like Sydney, this is significantly lower than the late 2020 peak of 171,000sqm, which was 3.4 per cent of total stock at the time.

Availability has grown by 1,400sqm in 2023, with the finance and technology sectors having the most space on the market with a combined total of 53,000sqm.

Brisbane’s CBD has experienced the biggest drop in sublease availability in the past year, going from 0.9 per cent to 0.5 per cent of total office stock.