Sydney, 22 July 2015 – Strengthening business conditions have underpinned a decrease in the volume of sublease space in Australia’s capital city office markets, according to the latest Sublease Barometer report from CBRE.
In Q2, the total volume of sublease space in CBD markets across the country dropped 14% to reach 278,200sqm, led by a 22% fall in Sydney, a 10.3% decrease in Melbourne and a 59% decline in Canberra.
CBRE Regional Director, Office Services, Andrew Tracey said improving conditions were apparent in Sydney and Melbourne as result of increasing occupier demand and business confidence levels.
“In Sydney, the 22% drop in sublease availability is a clear indication the office market is strengthening, with the CBD receiving a third of new listings during the quarter, originating from business expansion as tenants outgrow space,” Mr Tracey said.
“In Melbourne, variation continues by industry, with sublease availability from the finance and insurance sectors dropping by almost 50%, dropping from being the largest provider of space with that position now held by the IT sector with 18,000sqm of availability.”
National Sublease Availability by Market – Q2, 2015
Nationally, CBRE’s Barometer highlights that contraction remains the primary motivation for the sublease stock currently available, accounting for 72% of space.
By industry, the resources sector is responsible for the highest quantum of sublease stock at 31%.
“Perth and Brisbane continue to experience a large volume of sublease stock as a result of contracting resource operations, including mining and engineering firms,” Mr Tracey said.
“Meanwhile, Canberra has seen a significant drop in sublease space, which coincides with the federal government’s move to maximise Commonwealth property leases by ensuring vacant space is filled with similar requirements.”
“By comparison, conditions are more varied across Sydney and Melbourne, which reflects the more diversified nature of the tenancy mixes in their respective CBD markets. 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.”
Major market trends
Sydney – Total availability decreased by 22% to 32,300sqm, its lowest level since tracking began in 2008, with an increasing number of options coming to market as a result of business growth. Contraction remained the largest motivation for sublease, representing 32% of availability, compared with 80% of availability 12 months ago.
Melbourne– Availability dropped by 10.3% to 75,800sqm. With a large amount of space offered by Medibank Private leased over the quarter, the IT sector has over taken finance & insurance as the largest provider of availability.
Brisbane – There was a modest easing in supply, with the quantum of sublease space decreasing by 3,000sqm to 52,300sqm. However, with underlying occupier demand soft and a significant supply cycle looming, including 180 Brisbane and 480 Queens Street, more space is forecast to come into the market.
Perth – Sublease availability rose 4,000sqm to 75,300sqm in the quarter – representing a 5% increase. Weak business confidence related to the resources sector continues to hamper occupier demand, with contraction remaining the only motivation for release space to the market.
Adelaide – Sublease space availability increased 3,200sqm to 19,800sqm, with all stock located in the core precinct of the CBD. The professional, scientific and technical services industry continued to provide the most sublease space, totalling 11,700sqm.
Canberra – Sublease availability decreased significantly by 59% to 22,700sqm in the quarter. The large fall in sublease availability coincides with the announcement in the Federal Budget that the government is working towards maximising value from Commonwealth property leases in Canberra by ensuring existing vacant space is filled with similar requirements.
National Sublease Availability by Industry – Q2, 2015
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.