The volume of Sydney CBD sublease space has hit a record high of 157,853sqm, representing a 90% surge in five months and enticing tenants into the market.
The latest sublease figures from CBRE reflect the impact of COVID-19, with a growing number of large space users seeking to offload unoccupied workspace to help cut costs.
The volume of sublease stock started to increase last year; however, much of the increase between Q4 2019 and Q1 2020 related to tenants committing to new developments or leasing refurbished office space.
The pendulum has since shifted, with contraction and cost cutting now accounting for 65% of the available stock according to CBRE’s latest Sublease Barometer.
While the extension of the Federal Government’s stimulus measures has helped to mitigate the softening labour market, tenant demand will continue to be impacted amidst softening economic conditions.
Some large space users with low occupancy levels are viewing subleasing as a logical way to cut costs, with the impact of COVID-19 now well and truly being reflected in the city’s sublease statistics.
Sydney CBD Sublease – Historic Trend
CBRE’s data shows that 128,545sqm of sublease stock was available as at 31 July 2020, rising to 157,853sqm as of 31 August 2020 – eclipsing the city’s previous high of 119,588sqm.
The Financial and Insurance Services industry has been the main contributor, accounting for 41% of the stock available at the end of August, followed by Professional, Scientific and Technical Services at 16% and Rental, Hiring and Real Estate Services at 15%.
95% of the current sublease stock is fitted and 72% of the stock is in Premium and A-Grade buildings – providing cost effective opportunities for tenants to secure space and avoid a capital outlay, enticing tenants into the market.
We are seeing larger, opportunistic tenants seek out cost competitive leasing options, with an increase in inspection activity for both sublease and direct space which is already fitted out. This is leading to an uptick in proposal requests in both market segments, which is expected to result in space coming off the market in the coming months.
Sublease stock is also providing flight-to-quality and flight-to-centre opportunities for non-CBD tenants seeking to capitalise on the current market conditions.
Motivation for Sublease – August 2020