Corporate trends shaping take-up of office space
The Australian Real Estate Quarterly Review Q4 2016 reports on the outlook for Australian office, industrial and retail sectors.
The focus this quarter is on how corporate trends are shaping demand for office space leading to improved take-up, particularly by smaller tenants.
Corporate tenants are in a climate of rapid change which is transforming their space needs. Yet despite companies working more efficiently, office demand has been positive.
Growth in service sector industries like professional services, information technology and education is positive for office demand on the east coast of Australia.
Trends like outsourcing and contracting are boosting office demand by smaller tenants. We estimate that more than 70% of the net take up in Sydney and Melbourne last year was from tenants seeking areas smaller than 1,000 square metres.
Occupiers are looking for more collaborative space including meeting areas and the co-working and serviced office sectors are also expanding.
The Sydney CBD office market is strengthening quickly given positive demand and withdrawal of older buildings for the Sydney Metro rail project or for residential use. The result is that prime net effective rents lifted by more than 15% over the past 12 months in the Sydney CBD.
Investment demand for Australian commercial real estate remains relatively strong and values continue to firm in most markets.