Sydney office market returning to normal

The Sydney office market is slowly returning to normal post Covid, with tenants increasingly searching for larger spaces to rent. 

The latest data from JLL shows that Sydney accounted for 60 per cent of formal tenant briefs for January and February, with 32 briefs in January alone.

This was the highest figure recorded across all Australian markets and is now back in line with pre-pandemic levels.

Tenants are also increasingly on the lookout for larger spaces to rent, with the size requirements of formal tenant briefs increasing 46 per cent and 57 per cent in January and February compared to the same time last year.

JLL’s Head of Sydney CBD Leasing, Will Hamilton said demand continues to ramp up across Sydney.

“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,” Mr Hamilton said.

“Organisations are focusing on enhancing collaboration and providing improved amenity, which in some cases is leading to increased footprints and supporting positive demand.”

Mr Hamilton also noted about 89 per cent of public market briefs in the month of February had a preference for fitted premises.

“Occupiers are looking to upgrade into better quality office accommodation that offers higher Environmental, Social and Governance credentials, better amenity and overall experience for their people,” he said.

“We expect this to remain a key theme for 2022.

“The continued rebound in demand likely means that effective rents have bottomed out.”

According to Mr Hamilton, premium and A-Grade office space had the highest levels of tenant inquiry.

“Our data shows that for the Sydney CBD, tenants who came to market in January are currently seeking approximately 23,000sq m of space to occupy, akin to pre-pandemic levels of activity,” he said.

“For February, the figure is estimated at a further 37,000 sqm of space, more than double for the same period two years ago.”

The Property Council of Australia’s latest Office Occupancy survey shows a consistent lift in workers returning to the office in Australia’s CBDs, with Sydney recording 18 per cent occupancy in February 2022, in contrast to 7 per cent in January.

JLL’s Office Leasing NSW Director, Justin Hayes said on the surface it appeared people were returning to the CBD.

“Sydneysiders have been presented with a number of challenges in the first few months of 2022 that have been viewed by many as roadblocks to coming back to the office,” he said.

“But we are now seeing activity is moving back to pre-pandemic levels.

“Anecdotally, we are increasingly hearing citygoers and CBD workers alike describe the city as getting busier.

“In speaking to the owner of King Street café Sevens Specialty Coffee, the number of coffees sold has increased exponentially since the start of the year, at an average of 15 per cent week-on-week.”

Mr Hayes said businesses wanted to return to the office.

“The beginning of the year, coupled with challenges including public transport disruptions, intense weather conditions and ongoing COVID-19 interruptions have been considerable and consistent, which makes the anecdotal evidence of CBD activity and momentum that much more significant,” he said.

“There is an undeniable desire from businesses to be back in their offices.”

With the economy expanding by 3.4 per cent in the December quarter and by 4.2 per cent over 2021 according to the ABS, Mr Hayes said he expected businesses to continue to look for more space.

“Net absorption in Sydney CBD totalled 10,800sq m over 4Q21, which is the third consecutive quarter of positive demand,” he said.

“The recent opening of international borders to fully-vaccinated travellers in late February will no doubt further boost activity in the Sydney CBD, particularly for organisations looking to establish a local office in the market.”

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.