Demand for Quality Fitted Out Office Space Drives down Sublease Availability

Office sublease availability has dropped or remained steady in all but one CBD market across Australia as occupiers seek out competitively priced office space with high quality existing fit-outs. 

CBRE’s latest Sublease Barometer highlights that Melbourne was Australia’s only CBD office market to record a rise in sublease availability in Q2, 2022. While this resulted in a slight 8.1% quarter-on-quarter increase in national sublease availability, the overall 268,553sqm tally of sublease stock remains 26.3% below that recorded at the end of December 2021 peak and well below the market peak of 428,600sqm in January 2021. 

CBRE’s Pacific Head of Office Leasing Mark Curtain noted, “The long-term trend remains positive as tenants proactively pursue competitively priced space with high quality existing fit-outs. While sublease vacancy will continue to fluctuate in the short term, particularly as major users resolve their long-term office accommodation strategies, we expect it to trend back toward the historic average to represent about 1.0% of Australian CBD office stock.” 

 

Australian CBD Sublease Availability 

CBRE’s data highlights that the Sydney, Brisbane and Perth CBDs recorded sublease declines of 4.1%, 17.9% and 37.4% respectively throughout Q2, while Adelaide’s sublease availability remained unchanged.

CBRE Research Senior Analyst Nick Baring noted that while the stock of space in Melbourne had risen by 29.6%, availability was still 26.3% lower than the level recorded in December 2021.  

“Regarding the Melbourne market, some occupiers are adjusting their office footprint and are capitalising on strong occupier demand for pre-fitted space. That said, sublease activity continues to be fluid and with tenants already in advanced discussions on some of the larger sublease tenancies that have been brought to market in recent months, overall availability is expected to decline in the coming months,” Mr Baring said. 

Australia-wide, Mr Baring noted that while occupiers now had a better sense of their space requirements, workspace reviews were expected to continue until the end of the pandemic.  

“Against this backdrop, we expect the Sydney and Melbourne sublease markets to remain active. Due to cost pressures, further additions and current availability is likely to be absorbed, given most sublease space is fitted and in prime grade buildings,” Mr Baring said.