Mixed results continue for the office market with the latest release of the Property Council’s Office Occupancy Survey for September 2022. Markets such as Adelaide, Perth and Brisbane CBDs recorded outstanding uplift in staff returning to the office while Sydney and Melbourne’s CBD results continue to lag behind.
There have been encouraging results for markets such as Brisbane CBD who have seen a significant rebound in workers back in the CBD with occupancy hitting 70 per cent, a rate unseen since June 2021. Midweek occupancy has recorded occupancy up to 79 per cent, however can range as low as 55 per cent for Mondays and Fridays. Perth and Adelaide CBD markets which did not endure the same levels of lockdowns during COVID-19 as the Eastern States have been rapid in their recovery, recorded at 76 per cent and 78 per cent respectively, peaking as high as 84 per cent.
The greater concern for office owners however has come from the largest CBD office markets in the country, Sydney and Melbourne. After prolonged and multiple lockdowns the urgency to return to office work on a regular basis has diminished. Adding to the hesitation for staff to get back into the city has been the poor weather conditions this year, high levels of rain has resulted in 2022 being the wettest winter for the last 20 years and with flooding in some areas being yet another deterrent for staff to make their way into the CBD.
Melbourne has enjoyed a slight uptick in occupancy this month now at 41 per cent after the prior two months results sat below 40 per cent. With vacancy at 12.9 per cent for the Melbourne CBD, the highest rate since 1999, and more uncommitted supply tipped to enter the market, the short term outlook will be difficult. While leasing enquiry is in the marketplace, many tenants are seeking smaller or adequate spaces for their current workforce, catering for business growth via their staff not being in the office on a full time basis and WFH solutions.
For Sydney the results are similar, initial signs of recovery in May to 55 per cent were welcomed by businesses and landlords, however were quickly halted, resulting in occupancy levels remaining stable since this time. Rather than moving upward, occupancy levels moderated and now are recorded at 52 per cent with many blaming not only the wet weather but a public transport system in disarray. Statistics from Sydney Trains confirm train patronage has been down the last three months with trips more than half that of pre-COVID-19 levels.
For many businesses, the skills shortage has resulted in greater flexibility extended to their workforce and as Sydney CBD’s vacancy hit double digits in the latest OMR results (17 year high), coupled with new supply additions and growing sublease, the recovery for the office market may be extended over a longer term than initially anticipated.
