THE PROPERTY DEVELOPMENT REVIEW
credentials”, says Patrick McFarland, JLL’s Director of Tenant Representation in NSW. Premium grade building’s vacancy remains lowest In terms of vacancy across the whole of Australia, premium grade buildings continue to possess lower vacancy rates relative to their lesser quality counterparts, as the flight-to-quality is elevating the demand for the best office spaces. In areas like the Melbourne Fringe market, organisations are actively gravitating towards higher quality office assets, with over 54% of new leases recorded being for Premium and A-Grade office stock. For the Sydney CBD, Premium building vacancy remains tight, with only 11.9% of Premium office space vacant, versus 13.6% of A-Grade and 14.0% of B-Grade. The availability of space is most dichotomous in Perth, where Premium vacancy sits at 8.8%, compared to A-Grade at 19.9% and B-Grade at 28.1%. The headline vacancy rate for the city has remained around the 20% level as businesses respond to the accommodation of a more permanently agile workforce by consolidation of space. Conversely, in the Melbourne CBD, Premium Grade (18.7%) has notably higher vacancy than its A-Grade (14.6%) and B-Grade (14.5%) counterparts, all the whilst total vacancy sits at 15%, which is close to the peak vacancy for the CBD over the past 20-years. In conclusion... In JLL’s report, the Director of Tenant Representation in Brisbane, Amanda Foggo, offers some advice that’s intended specifically for Brisbane-based tenants, but feels pertinent for organisations all across Australia: “As the uncertainty of COVID-19 dissipates, the generous incentives are expected to remain, however we are seeing an upward trend in asking rent. This, in turn with higher interest rates and reduced investment activity will see landlords begin to push face rents once again in order to offset asset value reduction.” Rent hikes could very well be on the horizon seeing as the demand for high quality office space has increased substantially over the first half of 2022. Tenants should continue to evaluate their requirements and adjust accordingly, whilst the market remains incentive-rich.
take the same amount of space as they held previously, but with fit-outs that are more socially friendly. “The right office can serve as a catalyst to improve relationships among leadership, enhance communication, drive innovation and create corporate culture. Access to a better range of facilities such as wellness and outdoor spaces, as well as amenities and location all play a pivotal role too.”
Key statistics for sustainability - Courtesy of JLL Australia
The “Professional and Business Services” industry has been one of the biggest contributors to the net absorption figures in 2022 thus far, with nearly each state experiencing significant office space demand from businesses operating in this sector. Since the start of 2021, enquiries from professional services have nearly doubled in Adelaide, and Brisbane has seen some of the city’s largest precommitments for speculative office space originating in the professional services industry. Other industries worth highlighting include Property Operators & Real Estate Service, Insurance & Superannuation Funds, Food & Beverage, and Scientific Services. Sustainability is a commitment that both tenants and landlords are dedicating themselves to. According to Mr. Greene, “25% of corporates have already adopted net zero carbon targets and that figure is expected to more than double by 2025.” This switch to sustainable practices by companies cannot be achieved in a vacuum; for organisations to achieve these lofty goals, they need to work in tandem with the landlords governing their office space. “When organisations commit to net zero carbon targets by a certain date, they’ll also need to ensure that the building they’re occupying, and the landlord are on the same path.” In cases where a tenant’s lease extends over a decade, these discussions need to be conducted earlier rather than later. Anthony Clark, Senior Director of Tenant Representation – Sydney, explains how transparency will be key in navigating decarbonisation efforts in the coming years. “Commitments to net zero may exclude tenants from being able to occupy certain office buildings in the future,” Mr. Clark emphasises. “It’s important to be aware and clear with your sustainability ambitions.” Certain industries are being noted as those prioritising sustainability goals, with operators in the life science sector showing willingness “to pay more for office buildings with green
Vacancy rates for Premium, A-Grade, and B-Grade office stock - Courtesy of JLL Australia
September / October 2022 – 13
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