Smaller occupiers lead the charge as office leasing rises

A clear division has emerged in the way small and large corporate occupiers are addressing their office requirements post pandemic, new CBRE research has shown.

In a new Office Footprints report, CBRE data highlights tenant size has become a major predictor of whether occupiers are going to expand or contract when making a leasing decision, with smaller tenants growing their footprints and larger corporates typically doing the opposite.

CBRE Head of Office Research Tom Broderick said an analysis of national office leasing deals from Q1 2021 to Q2 2022 showed that sub-1,000sqm tenants grew their footprint by an average of 20.4%, while 1,000sqm to 3,000sqm tenants expanded by an average of 11.0%. On the flipside, larger tenants of over 3,000sqm contracted by an average of 12.6%.

“Smaller businesses have typically grown their headcount over the past few years and are also wanting more collaboration space and smaller meeting rooms within their offices,” Mr Broderick said.

“In contrast, larger corporates have typically been slower to return to the office and are seeing opportunities to cut costs by reducing their footprint as they increase desk sharing ratios.”

While CBRE’s report highlights a clear focus by larger occupiers on increasing office occupancy levels, there is continued uncertainty about floor space needs.

Darren Nugent, Regional Director of CBRE’s Pacific Office Occupier business, noted, “The overwhelming response from larger organisations is that they want to improve occupancy levels in their offices to drive collaboration, build culture and ensure that younger team members are receiving the mentoring they need to advance in their roles. However, set against this is the fear of losing staff who prefer to work remotely, and many occupiers remain unsure about their future office requirements.”

Size differences aside, CBRE’s report shows that overall leasing activity is on the rise across Australia, with double the amount of leasing decisions in H1 2022 compared to the same period in 2021 (factoring in both renewals and relocations).

In addition, about 68% of leasing decision in H1 involved tenants maintaining or expand their footprint.