Office Space Demand Forecasted To Fall In Australia
AUSTRALIA – Demand for office space and earnings from such commercial properties are both forecasted to decline as more employees prefer to work from home (WFH) in 2022. In turn, the sluggish rents and poor cash flows would impact the prices of office buildings, according to a recent report from The Urban Developer.
Based on Standard & Poor’s top industry trends for this year, many staff want to continue telecommuting and this trend, along with any future pandemic measures, are expected to push up office vacancy levels.
Aside from that, many global companies in the Asia Pacific region said they plan to slash their office footprint.
Another forecast is that office landlords will become more flexible, as they vie against sub-leasing tenants to offer incentives and various lease terms.
Still, some of the negative impact from the high office vacancies and dismal rental will take time to emerge because of long lease terms. However, office landlords may not be able to quickly tackle balance sheet problems arising from such.
Statistics from the Australian Property Council’s latest office market report revealed that office vacancy in the country rose from 11.9 percent to 12.1 percent in the 6 months to January 2022.
Three of the four office markets in non-CBD areas with negative demand for office space are all located in New South Wales (NSW), namely Chatswood, North Sydney, and Crow’s Nest-St Leonards. In addition, about 33 percent of the office stock entering the market this year are situated in Sydney.
Although all capital cities in Australia saw positive office leasing demand last month, only Sydney and Brisbane were not above historical averages.
Furthermore, office vacancy levels in Melbourne and Brisbane also by 11.9 percent and 15.4 percent in January 2022 compared to July 2021 Office stock also exceeded demand in both places, based on data from Australia’s Property Council.