Sydney & Melbourne CBDs experience a surge in demand for office space

The Reserve Bank of Australia predicts that the domestic economy will go up by 4.25 percent

For the first time since the pandemic started, two of Australia’s major office markets seem to be experiencing a major shift. Rents are rising in Melbourne while there has been an increase in demand for larger, better quality spaces in the Sydney CBD, according to The Australian Financial Review.

Due to stronger leasing activity, prime net effective rents in the Melbourne CBD increased 6 percent in Q1 2022. Cushman & Wakefield head of research John Sears says this is the first surge in rent since Q4 2019. 

Knight Frank noted that the key drivers for the demand in Melbourne included financial services, professional services, and public administration. It also revealed that the insurance and finance industries led the surge. They accounted for more than 50 percent of office take-up in the CBD last year.

For the first two months of the year, JLL Australia reported that Sydney recorded 60 percent of all tenant briefs across Australia’s office markets, registering 32 briefs in January alone. In all Australian markets, this is the highest figure and is comparable to pre-pandemic levels.

More: Australia bounces back as office space demand increases in 2022

JLL’s Head of Sydney CBD Leasing, Will Hamilton said, “We continue to see good levels of demand across smaller and larger occupiers of space, with the leasing momentum seen in 2021 continuing this year. Organisations are focusing on enhancing collaboration and providing improved amenity, which in some cases is leading to increased footprints and supporting positive demand.”

“Occupiers are looking to upgrade into better quality office accommodation that offers higher ESG credentials, better amenity, and overall experience for their people. We expect this to remain a key theme for 2022. The continued rebound in demand likely means that effective rents have bottomed out,” he added.

The Australian economy is on the upswing in 2022, with activity in New South Wales recovering fast. It grew by 3.4 percent in the December quarter, and by 4.2 percent over 2021, according to the ABS national accounts.

This year, the Reserve Bank of Australia predicts that the domestic economy will go up by 4.25 percent.

The Property Report editors wrote this article. For more information, email: [email protected].