Rethinking The Australian Office

Investing in a higher quality working space has been one way that employers can encourage employees back to the office. Perhaps unsurprisingly, even prior to the pandemic demand for prime office space outstripped that of lower grades, particularly once controlling for the relative stock of each in the market. Analysis of almost 250 Sydney CBD lease agreements over the past year confirms tenants’ preference to upgrade the quality of their office space.

Of the tenants that changed offices within the CBD, 45% moved into a higher grade while 40% stayed in the same grade of building. Of those tenants who relocated to a lower grade of building, 62% increased the amount of space leased and 38% moved into the city core. This could be a product of tenants attempting to keep costs as flat as possible by exchanging grade for space or location. Tenants that moved also showed a bias towards locations with more amenities, and speculative or refurbished fit outs.

FIGURE 3: AUSTRALIAN CBD NET ABSORPTION AS A % OF STOCK

14%

12%

10%

8%

6%

4%

2%

0%

-2%

-4%

-6%

2015

2016

2017

2018

2019

2020

2021

2022

2023

Premium A B

Source: Property Council of Australia, Cushman & Wakefield

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