Quality CBD offices in high demand as remote workers return to their desks
Elevated incentives and easing rental affordability will make it easier for businesses to move into available office spaces. 11.06.2020. Picture: Renae Droop
Bosses across Australia are moving to higher grade office spaces and prioritising amenities to combat the rise in employees working from home.
New data conducted by Investa has revealed tenants in office markets are upgrading and moving within the space, with a four per cent growth in the second half of 2022.
The Investa Inside Office Market Outlook saw premium grade CBD buildings had performed better than their A-grade counterparts, with that sector’s softer growth weighed down by “tenant churn”.
Bosses are moving their businesses to premium grade CBD buildings with co-working amenities to lure workers back to the office. Picture: NCA Newswire / Gaye Gerard
This term refers to office-based businesses transitioning to a hybrid workplace structure, in which the focus places a greater emphasis on workplace design and how the space is used.
Investa’s head of research David Cannington said that many office tenants in Sydney had been upgrading their workplace to cater to their workers’ post-pandemic requirements.
“Australian CBD office markets are adjusting to the combined impact of both a reset in tenant requirements and the challenge of macroeconomic headwinds.
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The rising popularity of hybrid workplaces has meant that office workers need to get more out of their spaces in order to be lured away from working from home. Picture: NCA Newswire / Gaye Gerard
“However, conditions will continue to favour office buildings and workplaces that provide market-relevant facilities and high-quality tenant experiences.”
Ray White’s commercial head of research Vanessa Rader believes that despite commercial investment activity taking a hit due to rising interest rates, sub $5m assets are more popular than ever.
Looking at the national volume of sales from May 2022 to this year, Ray White’s data indicated over two billion office suites under $5m had sold in the 12 month period.
During the pandemic, office precincts in both Sydney and Melbourne shut their doors permanently as the impact of lockdowns reduced their profits. Picture: NCA NewsWire / David Geraghty
Buyers in NSW and Victoria were particularly active, with a rise in activity in Queensland and WA.
“Both vendors and buyers have been more cautious with their property decision making, and various investors have exited the market due to the greater difficulty and increased cost of financing,” Ms Radar said.
“This has been price point driven, with the average sale price of $878,000.”
Premium-grade CBD buildings have been particularly popular among office tenants. Picture: NCA NewsWire / Paul Jeffers
The trend follows a post-pandemic preference for workers to operate in buildings and office spaces with enhanced customer experiences and greater flexibility.
It also reflected favourable conditions for tenants to continue affording the rents for these spaces.
“Tenant demand for higher grade office space has driven a recovery in price office rent growth across Australia’s major CBD markets. However, rental increases over the past year have only increased at around half the rate of office-based business income growth,” Mr Carrington said.
Placing greater flexibility on working from home and working from the office has been a priority for office tenants looking to keep workers on site.. Picture: NCA NewsWire / Andrew Henshaw
“There are undoubtedly some challenging business conditions Australian tenant businesses are facing.
“However, elevated incentives and easing office rental affordability have offset some of these pressures, enabling tenant businesses to upgrade to buildings and office space that deliver high performance, enhanced customer experience and greater flexibility.”
