Sydney office space set to boom as record levels of supply hits market
The return of overseas students and the growth of skilled migration is expected to breathe new life into Sydney’s CBD.
Demand for CBD office space across Australia is growing, but so too are vacancy rates.
According to the Property Council’s Market Report for January 2023, demand was up 0.1 per cent across Australia’s CBD over the past six months.
However the report also showed overall CBD vacancy had increased from 12 to 12.5 per cent nationally,
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Vacancy rates are up in Sydney. Picture John Grainger
Vacancy rates in Brisbane fell from 13.9 to 12.9 per cent, Perth dropped from 15.8 to 15.6 per cent, and Hobart recorded a drop from 2.7 to 2.5 per cent.
Rates rose from 8.6 to 8.9 per cent in Canberra, 10.1 to 11.3 per cent in Sydney and 12.9 to 13.8 per cent in Melbourne. Adelaide’s vacancy lifted from 14.2 to 16.1 per cent driven by above average supply additions.
In those markets where vacancy increased, there were moves toward prime stock over secondary stock, the report said.
There is hope that growing supply could attract investors looking for opportunity, especially in the Harbour City.
Property Council’s acting NSW executive director Adina Cirson said that while occupancy levels remained modest at 59 per cent, the amount of available space for sale offered a significant opportunity for commercial investors.
“Our results today show that in fact the office is in even more demand than previous reports,” she said.
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The Sydney CBD is still recovering from the impacts of closures and restrictions felt during the pandemic in 2020. Picture: Toby Zerna
“The next two years for the Sydney CBD will witness 90,141 sqm of new stock to enter the market in 2023, followed by 147,357 sqm in 2024, which is the highest in Australia.
“Not only does this provide certainty for our CBD, it proves that the Sydney office market will remain as the benchmark, despite the challenges we have faced in the last three years.”
The report forecasts the future of office supply to be higher than the historical average throughout the year.
Demand for office space in Sydney’s CBD is predicted to be strong in 2023. Picture: NCA Newswire / Gaye Gerard
The vacancy rates of offices in Sydney’s CBD increased as additional supply was added to the market, with premium vacancies rising from 8.6 per cent to 10.1 per cent.
While the office market had seen an increase in the level of demand, Property Council of Australia chief executive Mike Zorbas said more work needed to be done.
“Growing skilled migration and the return of overseas students is most welcome. The leadership role of governments and the active engagement of their teams in CBD life should remain front of mind for decision-makers in 2023.”
The Sydney CBD is predicted to have 147,357 sqm of new office stock in 2024. Picture: NCA NewsWire / Nikki Short
“The NSW Government should establish a CBD recovery and revitalisation industry partnership group in collaboration with the City of Sydney, the Property Council, and other peak bodies to advise government on the practical steps to continue the ongoing renewal of the CBD,” Ms Cirson added.
Brisbane’s office market has proven to be a strong performer over the last six months.
“Tenant demand outstripped supply in Brisbane, pushing the vacancy rate down from
13.9 to 12.9 per cent,” Mr Zorbas said.
“Looking forward, there is less than 100,000 sqm of office space coming online in
Brisbane over the next three years, of which 72 per cent has already been precommitted,” “This is the third six-month period of positive demand nationally for office space in our CBDs.
“Organisations see that an office presence in our cities is an essential part of doing business.
“While new supply has increased total vacant space in some areas, these latest numbers are a vote of confidence in our CBDs.”
