Tenant demand for Sydney offices remaining positive
An easing in the Dexus Office Demand Barometer in the March quarter points to tenant demand for Sydney offices remaining positive but returning to more sustainable levels over the course of 2016.
Office demand in the Sydney CBD continued its solid run with nearly 36,000 square metres of space taken up in the March 2016 quarter and 145,000 square metres for the past year (JLL Research).
The rate of absorption of prime office space in Sydney is running at over four times the ten year average indicating a preference by tenants to upgrade to high quality stock (206,000sqm of net absorption in prime buildings for the year). These trends have improved the outlook for the Sydney office market by absorbing new supply faster than expected.
The Dexus Office Demand Barometer registered 0.9% in March 2016 quarter – an easing of 0.4% from the previous quarter.
Dexus Office Demand Barometer
Note: The Dexus Office Demand Barometer indicates conditions for future demand for Sydney CBD office space.
The Barometer was affected by volatility in the sharemarket and a tapering of job advertisements, which grew by only 0.3% over the past quarter, implying a stabilisation of hiring intentions.
The easing in the Barometer points to demand returning to more sustainable levels over the course of 2016. Overall the outlook for office demand is positive given that an improvement in business confidence appears to be translating into increased inquiry levels.
Barometer vs. actual demand
Source: DEXUS Research, JLL Research.
About the Barometer
Dexus's Office Demand Barometer is a specialized model that provides a leading indicator for conditions which determine the level of leasing demand for Sydney CBD office space as a percentage of occupied stock over the next six months. The Barometer includes five variables which have been carefully selected based on their high correlation with Sydney CBD office demand.
- S&P/ASX 200 Index
- NAB Business Confidence Index – finance/business/property sectors
- ANZ job advertisement series
- US ISM Manufacturing Index
- Short term business travel departures
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General Manager, Research