Australia’s office market is feeling the full force of the economic impact caused by COVID-19, with a recent report showing that sublease space has risen by over 30% in the third quarter.
A total of 352,768 sqm of office space is now subleased nationwide, equating for 2% of the entire country’s office stock.
CBRE’s Head of Office Leasing for Pacific, Mark Curtain, said that despite the market showing steady signs of progress sublease space is expected to rise even further in the coming months.
The landscape of Australia’s office market has changed significantly in 2020, with occupiers shedding space that was earmarked for growth.CBRE Head of Office Leasing for Pacific – Mark Curtain
“As tenants right-size their business for the anticipated economic conditions ahead, vacancy in the sublease market has grown to represent 2% of Australia’s office market,” Mr Curtain said.
Findings of the September Sublease Barometer report show that prime grade office stock has been most susceptible to subleasing, making up a total of 80% of the total market volume.
“When it comes to assessing and making decisions around long-term real estate strategy, occupiers are adopting a more intensive risk assessment amid growing economic uncertainties and the widespread adoption of remote and flexible working,” said Mr Curtain.
CBRE’s Head of Office Occupier Research, Joyce Tiong, said that the ongoing economic difficulties will result in landlords having to adopt greater flexibility in regards to leasing terms.
Continued cost-cutting by businesses and persistent economic headwinds will result in occupiers seeking greater lease flexibility to accommodate a ‘flex up’ or ‘flex down’ workforce – as well as catering to employee expectations for a ‘more than a workspace’ environment.CBRE Head of Office Occupier Research – Joyce Tiong
“The continued rise in sublease volumes will also provide an influx of attractive tenancy options in the market, including both short-term and longer-term opportunities for quality fitted space in major office locations,” Ms Tiong said.
Sydney and Melbourne have seen the largest rise in office space subleasing, whilst Brisbane has bucked the national trend.
Sydney has hit the highest level since 1992 with a 56% jump equating for 164,950 sqm of offcie space subleased, with Melbourne surging by 46% representing 93,257 sqm.