Sydney suburbs in vogue as office as offices shift from CBD
Subdued business conditions and a lift in new developments have prompted a drop in space being taken up in office towers in the heart of Sydney but demand in the country’s resources capitals is holding up.
The softness accords with the relatively cautious outlooks of occupiers, including banks and companies exposed to weak consumer spending, and the quiet leasing market in the middle of Sydney.
The Sydney CBD was the only CBD office market to record negative net absorption in 2019, with this hitting 63,200sqm and the vacancy rate increasing to 5%.
JLL head of leasing, Australia, Tim O’Connor, says Sydney’s office market was hit by NSW government departments shifting to suburban locations, a consolidation by Telstra and softer business confidence, driving an increase in sublease space. In contrast, the city’s metropolitan office markets had a very strong year, with the largest take-up in Parramatta (46,900sqm), on the Sydney fringe (41,800sqm) and in North Sydney (22,500sqm).
The resources-driven Brisbane and Perth office markets are on the up with major companies on the move in those markets, spurring developments.
Agents say there is strong demand for office space in parts of Sydney. Picture: Nicholas Eagar
But overall business confidence deteriorated last year and there was softer net absorption in a number of markets. Australia-wide, JLL Research’s fourth quarter 2019 statistics showed positive net absorption of 15,200sqm over the final period, and 50,000sqm over 2019, in the weakest result since 2014. The national CBD office market vacancy rate fell by 0.3 percentage points to 8.3% over 2019.
JLL head of research, Australia, Andrew Ballantyne says the resource sector is in expansion mode. “Over the quarter, BHP and the New Hope Group expanded their occupational footprint in the Brisbane CBD.”
The Brisbane CBD recorded 28,900sqm of net absorption in fourth quarter and 44,900sqm over 2019 — well above the 20-year average of 27,100sqm. The headline vacancy rate compressed by 1.5 percentage points to 11.7%.
In the west, the Perth CBD recorded net absorption of 5800sqm in the last quarter of 2019, and 28,900sqm over the year — almost double the 20-year average of 14,700sqm.
Its vacancy rate remains elevated at 19.1%.
