The amount of unwanted office space across Australia rose 7.2 per cent over the first three months of the year to 326,446 square metres, its highest level in more than a year.
Sublease space, a key measure of business confidence and the health of the economy, rose in every city except for Brisbane and Adelaide. But the figures reveal a stark disconnect between the office markets in the nation’s capital cities according to the latest CBRE Sublease Barometer.
Andrew Tracey, CBRE regional director, Office Services, said despite rises in both Sydney and Melbourne is he confident both markets are showing improving conditions.
“This year, compared to the last five years, I am more optimistic,” he said. “Office markets are more analysed than ever before and the key take from this latest research is Melbourne and Sydney are disconnected from the rest of Australia.”
Mr Tracey said the rise in Sydney was primarily generated by tenants outgrowing space and relocating, then subleasing the old office space. Availability rose 9.9 per cent to 41,957 sq m compared with the end of 2014. In Melbourne availability increased by 6 per cent to 83,598 sq m.
“In Sydney and Melbourne the source of sublease stock is more varied, reflecting the more diversified nature of the tenancy mixes in these two cities,” he said.
“There is also greater variation in regard to why sublease space is being offered in these markets, with business growth and relocation the key motivators in Sydney and relocation also a key driver in Melbourne.”
In Sydney, for instance, LinkedIn grew from one to three floors in 130 Pitt Street totalling about 2400 sq m. They are now looking to sublease those floors and have leased 3700 sq m at 1 Martin Place.
In 2013 Sydney’s sublease space was far higher at 80,000 sq m. But Melbourne also had significant contraction with 4730sq m becoming available at 727 Collins Street during the quarter as a result of contraction by Mercer while 1073sq m became available at 452 Flinders Street following contraction by Jacobs.
In Canberra availability spiked sharply thanks to poor demand and federal government contraction.
Brisbane surprised with an easing of available space. But as with Perth, the weak resources sector will continue to affect demand and more space is expected to be handed back this year. The resources sector is responsible for the highest quantum of sublease stock at 29 per cent.
During the quarter, one floor of BHP space at Riparian Plaza was taken up by KPMG and a small amount of space in Brisbane also converted to direct vacancy or was handed back to landlords.
Perth also rose, thanks to increases in space being offered by Deloitte at Woodside Plaza and HBF at the soon to be completed Kings Square.