Home Insights PropTrack office snapshot 2021 – realestate.com.au

PropTrack office snapshot 2021 – realestate.com.au

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  • Despite the increase in telecommuting, tenant demand has increased in all capitals over the past six months.
  • Office sales in 2021 have increased since 2020, but are below pre-COVID levels.
  • Demand for buying offices is recovering faster than demand for leasing offices.
  • Lower effective rents have made renting Australia’s major CBD office spaces more affordable. As a result, the percentage of companies considering renting on CBD is increasing.
  • Office investors are increasingly focusing on assets with high quality, low risk tenants.
  • Lifestyle features are more important to post-COVID residents, and more companies are looking for offices in the immediate vicinity of food and hospitality amenities and fitness facilities.

How is the search volume tracked?

Omicron delayed the return to the office, which many expected to meet the vaccine threshold. Many companies have already established post-COVID frameworks for remote and hybrid work practices, but determining new space requirements remains a challenge. The average number of days an employee chooses to work in the office can remain unclear until we are on the other side of the pandemic.

It is not yet clear whether coworking spaces that were popular before the pandemic will become popular again in the near future.Photo: Getty


Historically, searches for buying and leasing offices have been closely matched. But throughout the pandemic, we’ve seen them diverge. Working from home, especially in Melbourne and Sydney, has led many companies to delay their rent decisions until they are confident that they will return to their offices uninterrupted. In contrast, investors tend to take a long-term view. As a result, the recovery in buyer demand outweighs the recovery in leasing demand.

According to the Australian Real Estate Council, office tenant demand will increase in all Australian capitals for the six months to January 2022, contrary to expectations that increased remote work will lead to lower space demand. did. in the meantime Vacancy rate is CBD in Sydney, Melbourne and Brisbane rose during this period as supply in these markets outpaced it. the Growth in tenant demand. Vacancy has declined in the last six months in all other CBD markets.

Sales are growing

After the first outbreak of COVID-19 in March 2020, there was a significant decline in activity across the commercial real estate market. After that, activity resumed, but overall sales were below pre-COVID levels.

In 2021, Real Capital Analytics estimates that offices priced at over $ 1 million accounted for $ 21.3 billion in sales in Australia. That’s 57% more than we saw in the same price range in 2020, but still below 2019 levels.

Investors are confident in the future of the office market and in 2021 several major transactions took place. This includes buying a 50% stake in Sydney’s 225 George St for $ 925 million and the NPS buying Melbourne’s 681 Collins Street. $ 1.2 billion.

Where are investors trying to buy?

The CBD market is still the most in demand among those looking to buy an office. In New South Wales, 15% of all searches to buy an office were done at Sydney CBD, up from 13.2% 12 months ago. Brisbane, Canberra and Darwin CBD also increased their respective percentages of purchase searches in 2021.

In contrast, the percentage of office purchase searches in Melbourne CBD has declined over the past year, from 10.1% in 2020 to 9.5% in 2021. Increased vacancies and lower rents may have contributed to this decline in demand, with similar declines. At CBD in Adelaide, Perth and Hobart.

Where are companies considering leasing?

Throughout Australia, CBD continues to be the most popular place to search for people considering renting an office. In addition, the percentage of companies considering renting in the CBD market has increased since 12 months ago. This is likely due to the decline in effective CBD rents seen since the outbreak of the pandemic, making these markets more affordable.

Comparing 2021 and 2020, Sydney CBD has 13.7% to 18% of companies searching for leases, Melbourne has 11.7% to 13.7%, Brisbane has 9% to 9.7%, and Perth. Has increased from 13.5% to 15%.

Adelaide was the only city with a slightly lower CBD search rate, but it remains the most dominant office market, accounting for 30.1% of all South Australian searches.

Significant rises have been seen in Surry Hills, New South Wales, Richmond, Victoria, and Fortitude Valley, Queensland, and many peripheral markets have also become relatively popular.

Floor area requirements

So far, the distribution of searches by minimum floor space has remained relatively unchanged in both the purchase and lease categories compared to pre-COVID levels. Searches are concentrated on the smaller edge, with 52.1% of purchase searches and 56.5% of lease searches at levels less than 200 square meters.

Continued uncertainty about social distance regulations and space requirements after COVID may have delayed the expected decline in space-employee ratio following increased remote work. The average lease size is expected to decline over the next few years.

What are investors looking for in the office they buy?

A significant percentage of searches for buying an office come from developers looking for opportunities to convert to homes that have the most “housing” keywords in both 2020 and 2021.

Office investors are paying more attention than they were before COVID, and are paying more and more attention to high-quality tenants and assets that already have a leasing structure in place. “Tenant” was the second most searched keyword among buyers, up 10% year-over-year, and related terms such as “high yield” also recorded an increase.

Suitable tenants or suitable offices for use in the medical and childcare businesses have grown significantly in popularity over the last 12 months, jumping into the top five most searched terms. As investors increasingly target low-risk “recession-resistant” assets, properties tenanted by medical and childcare have performed well over the past 12 months.

What are you looking for in the office you are renting?

Among those considering renting an office, “kitchen” was the most frequently searched keyword, up 57% year-on-year. At the smaller end, many residents were looking for an office with a dwelling. “Housing” is the third searched keyword.

The search for buildings of class “9B” ranks second among those seeking to rent an office. This classification is necessary when people come together for social, political, drama, religion, or civil purposes such as education.

Set up a mat in a yoga studio

In the post-COVID world, it is important to be close to facilities that are attractive to office workers such as gyms, fitness centers and cafes.Photo: Getty


Following the increase in telecommuting, businesses expect more from the offices they lease. Offices are seen as more than just a place to sit and work, and the social and collaborative benefits of the office are gaining increasing attention.

Over the last 12 months, searches for offices near cafes and restaurants have increased by 292%, and searches for offices near fitness facilities such as gyms and yoga studios have increased by 115%.

Spaces such as balconies and terraces are also becoming more important to tenants and are the sixth most included keyword, up 23% year-on-year. Shower facilities at the end of the trip are also in the minds of tenants and are the fifth most common search term. Searches that include “end of trip / shower” have increased by 75% in the last 12 months, probably due to increased aversion to public transport, probably as a result of a pandemic.

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