Written by Simon Gunniss.
The following paper has been prepared to inform key decision-makers within the Sydney Tenant Community on matters of corporate real estate (CRE) and accommodation strategy in advance of critical events within commercial office leases.
2023 Sydney Commercial Office Market Update
“Snapshot’ of the 2023 Sydney Office Market:
2023 Sydney Commercial Office Market Update
- Office Vacancy: has increased to 11.3%, the highest rate in ten (10 ) years !
- Future Supply: 2023 -90,000 m2, 2024 -147,000m2, 2025 – 63,000m2
- Office Demand: Positive demand is isolated to ‘Premium’ grade buildings.
- Negative Demand: is concentrated in the lower grade buildings (B, C and D)
- Lessor Incentives: 30 – 39% of gross rental commitment over the agreed lease term, depending upon lease term, building grade, and CBD precinct/location.
- Sublease Space: Approx 100,000m2 largely ‘Premium’ and ‘A – grade’ stock.
2023 Sydney Commercial Office Market Update
Two (2) new critical dynamics impacting corporate real estate and workplace decision making:
2023 Sydney Commercial Office Market Update
- National Unemployment rate of 3.5%: The Sydney recruitment industry would have you believe the 3.5% cohort has completely opted out of employment, and therefore any new talent acquisitions be deemed as ‘currently employed’, requiring inducement to change roles.
- Employee demand for flexible working: COVID’s by-product, ‘flexible working’, is here to stay, regardless of the bleating’s of the ‘Doubting Thomas’ community, largely comprising commentators from the supply side of the property market (building owners and their agents).
2023 Sydney Commercial Office Market Update
The ‘workplace’ is now (more than ever) a key enabler of business success:
2023 Sydney Commercial Office Market Update
- The ‘Flexible Working’ model places greater emphasis upon the provision of collaboration spaces within the workplace.
- The ‘tenant friendly’ market conditions afford the opportunity to ‘right size‘ the workplace and correct current passing rental rates back to market.
- The opportunity to leverage your lease covenant and secure a higher-grade building asset.
2023 Sydney Commercial Office Market Update
The following is an indicative guide to overall durations relative to area (m2) occupied:
2023 Sydney Commercial Office Market Update
Summary:
2023 Sydney Commercial Office Market Update
- The creation of competitive tension between your existing lessor and the market is a fundamental prerequisite in achieving an optimal corporate real estate equation.
- Start the process early, as time is the nemesis of the best-laid plans within commercial property markets.
