Australia to face massive office shortage
Australia’s major cities need to add more than 13 million square metres of office space by 2047 if they’re to cope with demand, a new report has found.
Demand for office space is set to surge in Australia, with Sydney and Melbourne to hit eight million residents each over that timespan, according to JLL’s latest Future Cities report, Australian Cities for a Metropolitan Age.
The biggest demand for space will be in Sydney and Melbourne, but while more offices will be needed in the city centres, demand is forecast to be strongest in the urban fringe, says JLL’s Senior Director Research Annabel McFarlane.
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“Office tenants prefer established office precincts with the amenity, infrastructure and services that CBD locations offer,” she says.
“However, as our workforce expands and cities densify, these CBD locations risk increased congestion and upward pressure on rents. Non-CBD markets will become increasingly relevant.”
McFarlane says the trend will mean businesses need to adopt innovative new ways to accommodate their workforce in the future, including adopting “a hub-and-spoke” model with client facing functions remaining in the CBD and support functions located in non-CBD markets. “
The forecast is based on data from the Australian Bureau of Statistics, showing the country’s population will likely hit 36 million in 28 years with Melbourne and Sydney to support eight million people by 2045, increasing to 10 million by 2065.
In terms of office space Melbourne will require the biggest injection of new property.
Experts are predicting 4.8 million square metres are necessary, with the city experiencing a decade of minimal non-CBD office development, resulting in the lowest vacancy rate of 4.8% since 1989.
Sydney will need 4.1 million square metres of office space, with suburbs such as Parramatta, Macquarie Park, North Sydney and Norwest likely to grow, according to the JLL’s team projections.
“Sydney’s CBD market is physically constrained,” McFarlane says.
“However, Parramatta’s supply cycle accelerated in 2014. NSW is in the midst of an unprecedented infrastructure boom, and infrastructure and demographics are reshaping metro office markets.”
Brisbane will be another area of growth and is predicted to have three million people by 2029, requiring an almost 50% boost in office stock equalling 2.2 million square metres, with a strong focus on Brisbane’s Fortitude Valley.
Perth will need an extra 1.7 million sqm with the population to reach three million people by 2042.
Interestingly, Adelaide is likely to remain a CBD-only market, with only an extra 485,000 square metres required by 2047.
JLL Victoria Managing Director, David Bowden says cityscapes are changing quickly, creating strong opportunities for investors and developers.
“Demand for office space is being influenced by both the rise of new industries and the way we work,” he says.
“Office markets in Australia’s largest cities have no option but to become more metropolitan as the cities grow.”