Recovery in tenant demand will be uneven across Australia, but the future of office is here to stay.
One of the greatest disruptions to global office markets was observed in 2020. Australian net absorption reached a historic low for the year, while national vacancy surged to highs not experienced since the late 1990’s. Tenant demand is expected to remain soft in 2021 given the potential downside risks that may arise as stimulus measures subside over Q1 2021.
Although the question remains on what a hybrid workforce will look like and what its impact to office demand may be, workplace occupancy will continue to be influenced by the containment of COVID-19 and the rollout of vaccination programs. Softer rental growth is anticipated in 2021 as a consequence of greater incentives on the back of weaker tenant demand.
Subsequently, we expect occupiers to use this as fresh impetus to push for more favourable terms while simultaneously transitioning to more agile solutions and reducing their office footprints.
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