The end of the office is far from nigh, according to the Property Council, who recently released their latest Office Market Report.
“While there is plenty of commentary about the end of the office, the data doesn’t suggest this, and there is a long way to go as business works its way through the economic and social impacts of COVID-19,” Property Council Chief Executive, Ken Morrison said.
Although the Office Market Report shows vacancy rates for offices in the Sydney and Melbourne CBDs have both risen over the first six months of 2020: Sydney at 5.6 per cent, up from 3.9 per cent, and Melbourne at 5.8 per cent from 3.2 – Mr Morrison points to previous “record low rates of vacancy” in the two cities as providing “a strong buffer” against COVID-19.
“The impact of COVID-19 on our CBDs and office markets is still at an early phase, but so far the pandemic has had only a modest impact on vacancy rates,” Mr Morrison said.
“Office markets started this pandemic in good shape, with incredibly low vacancies in Sydney and Melbourne, and strengthening positions in most other markets.
“Vacancy rates have increased over the past six months, but tenant demand has so far been flat, not falling, and overall vacancies are still below the historic average.
“It’s a reminder that office markets have been resilient in the first stage of the pandemic, despite the fact that many office workers have spent months working from home.”
Melbourne’s 4.6 per cent increase in additional office space impacted its rise in vacancy rates.
Other capital cities are faring less well: Canberra offices sit at 10.1 percent vacancy rate, Brisbane at 12.9 percent, Adelaide at 14.2 percent, and Perth at 18.4 percent – with almost one in five offices sitting empty.
Note that vacancy rates relate to lease holders, not the physical presence of a company in a business, meaning the recent lockdowns have not impacted Melbourne’s figures as drastically as one might assume.
“While office vacancies increased over the period,” Mr Morrison continued, “aggregate tenant demand was flat across CBD markets with vacancy increases driven by increases in supply.
“However tenant demand did vary from market to market, most notably in Sydney where net demand fell 1.2 per cent.
“Sublease vacancy in the capital cities – a key metric in falling markets – increased by 0.2 percent, but this is still at modest levels compared to previous downturns.
“The reactivation of our CBDs and office buildings will be an important element of our economic recovery in coming months, and something that all levels of government will need to consider carefully,” Mr Morrison said.
“Vibrant CBDs drive investment, growth and productivity and must be part of our national recovery planning.”
