Sydney, 17 July 2014- After major increases and decreases in total sublease space across the country last quarter, Q2 2014 has seen a flattening out across the sublease office market.
CBRE’s Q2 National Sublease Barometer shows that Sydney and Brisbane both recorded similar levels to the March quarter, Melbourne and Perth a slight increase, and Canberra a slight decrease.
CBRE Regional Director, Office Services, Andrew Tracey, said sublease continues to be a major factor in most markets but can appear and disappear very quickly as business sentiment changes.
“Good fitted out quality space in core locations continues to move reasonably well provided longer term tenure is available. Significant tranches of sublease space are on offer across the country as ‘direct deals’ with building owners being prepared to surrender space if new incoming tenants have quality covenants. Poor space or poor fit outs are unlikely to move and will be ‘deferred’ vacancy to be dealt with at lease expiry,” Mr Tracey said.
CBRE’s Sublease Barometers track both the volume of sublease space and the trends occurring within different industry groups and market sectors.
The downward trend in Sydney’s sublease space has flattened out in Q2 2014 after a substantial period of decrease in space since Q4 2013, with total space hovering around the 40,000sqm mark for four consecutive months.
Melbourne saw a slight increase in Q2, up 1,934sqm to 75,126sqm as of June 2014. Large additions to the sublease barometer included 3,800sqm at 818 Bourke Street by Ericsson and 1,500sqm at 825 Bourke Street offered by Fujitsu. Both sublease offerings were motivated by contraction.
Perth also saw a slight increase in the June quarter, rising 2,732sqm to 63,452sqm. Mining and engineering tenants actually saw a decrease in space, but a sharp increase for finance, professional services and legal tenant pushed the figure higher.
After seeing an increase last quarter, Brisbane has remained steady in Q2 at around 79,490sqm of sublease space available. Although this is still well above the historic average, the figure will drop further in the second half of 2014 with the expected commitment by Suncorp to almost 7,000sqm of Rio Tinto sublease space at 123 Albert Street.
Canberra was the only city to see a decrease in space, albeit a moderate one, as total sublease space dropped by 5% to 33,500sqm.
However, Mr Tracey said across the markets State and Federal Government continues to be a major contributor to the amount of sublease space, affecting Canberra in particular.
“Many businesses are reluctant to share buildings with Government, especially when at present large numbers of alternative options exist. Much of this Government sublease space could end up being ‘shadow’ vacancy that will not be removed from the market until lease expiry.”
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