Office Market Report: Sydney
Last week, the Property Council of Australia (PCA) released its Office Market Report figures for the first half of 2024. The PCA has been doing so since the 1990’s so it is a great indicator for trends in the office market.
2024 started with a flurry of activity; a mixture of new enquiry and deals that usually would have been completed by the Xmas prior. The delay in transactions from the tenants’ side was due to increased business caution which started in the second half of 2023. This, coincided with the landlords bullishness on the market and created an expectations gap between the two.
By March, market activity slowed, real demand was minimal, and the expectations gap was gone. The flight to quality became the flight to value. This usually happens when the heavily incentivised, higher quality buildings lower vacancy and tenants look for better commercial offerings elsewhere. At the halfway mark, the market remains quiet.
The PCA statistics for the Sydney CBD office market for the first half of 2024 are:
- Stock 5,177,437 m2 – decreased, withdrawals of approximately 0.8%
- New supply 0 – approximately 176,000 m2 coming online in second half 2024
- Vacancy decreased from 12.2% to 11.6% due to withdrawals
- Absorption – net absorption of negative 4,630 m2
- Absorption – 6 month net absorption average in the 5 years to January 2020 was positive 17,006 m2
- Absorption – 6 month net absorption average in the 4.5 years since January 2020 has improved marginally from negative 22,222 m2 to negative 20,268 m2
With high vacancy and subdued demand, expectations may need to be reset. Tenants looking to right size will do so if the numbers stack up.
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