Colliers national leasing executive provide Australia wide commentary on the release of the PCA report today. 

National Office

Cameron Williams – Managing Director, Office Leasing Australia

• “Despite the overall national vacancy rate increasing, the results remain divergent by market and grade and there is still a strong pull to quality and a pull to precincts underpinning strong levels of leasing activity.  
• “The North Eastern part of the Sydney CBD, the Paris end of Collins Street in Melbourne and the River Precinct in Brisbane are favoured by tenants, who are prioritising easy access to public transport, buildings which provide amenity, and offices which entice employees. They want their people to enjoy being part of the office experience when they’re in.”
• “We are seeing strong indicators of demand, which bode well for the second half of 2023, including an increase in the number of enquiries (H1 2023 up 15% on H1 2022) and healthy levels of leasing activity (H1 2023 up 11% on area compared to H1 2022).”
• “We’ve witnessed some strong green shoots over the first half of the year, with bigger tenants reentering the market, and increased activity from SME’s, who accounted for 88% of leasing deals nationally.”

Joanne Henderson - Colliers’ National Director of Research 

• “The CBD vacancy rate across the six core CBD markets* has increased by only 0.3 percentage points over the first half of 2023, from 12.7% to 13.0%.  Whilst an increase has been recorded overall, there is more stability at a national level than what was experienced over the same period last year.  However, a divergence remains by market and grade with different supply and demand impacts across the CBD markets.”
  • *includes Sydney CBD, Melbourne CBD, Brisbane CBD, Adelaide CBD, Perth CBD and Canberra (excludes Darwin and Tasmania which would be included in the PCA CBD figure).
• “New and refurbished development supply side-factors that have been adding pressure to vacancy levels in Sydney, Melbourne and Brisbane are no longer in play.  However, Perth and Adelaide are now experiencing new supply to market, adding to fluctuations in vacancy levels.”
• “At a national level, supply side impacts to the CBD markets are set to improve over the second half. 2023 will see gross supply additions 20% below the long-term annual average with only 370,000 sqm expected to complete by year-end.  The slowdown in development activity is expected to allow current vacancy levels to reduce or stabilise, particularly for prime grade space.”

Sydney CBD

Jock Gilchrist – Head of Office Leasing, NSW

• “Although vacancy pressure remains sticky from sub-lease and backfill space to market, healthy levels of gross lease activity still exist with H1 2023 up 10% on the area leased compared to H1 2022.”  
   
• “We predict the North Eastern part of Sydney’s CBD will continue to perform well, given the quality of new developments that have entered the market within this precinct including QQT and Salesforce Tower. These buildings represent the top end of the market nationally, and they influence occupancy and rental uplift for high quality offices in close proximity.”  
   
• “Limited new supply additions over 2023 are expected to support stabilisation of vacancy in the CBD for the remainder of the year.”

Melbourne CBD

Andrew Beasley – Head of Office Leasing, VIC

• “While demand over the first half of the year remained steady, and the quantity of backfill has increased, the forward outlook is positive.”
• “With only one development to be completed in 2023 (Charter Hall’s 555 Collins Street) and a number of larger tenant briefs (5,000sqm+) that are currently active (120,000sqm in total), we expect to see an improvement in the demand/supply balance over the coming six to 12 months.” 
• “This is supported by the number of leases struck in the first half of this year, which is 27% higher than the first half of 2022.”
• “We also witnessed stronger enquiry levels than previous years, particularly now at the larger end of the market(5,000sqm+).”
• “Despite the negative press, the outlook for the Melbourne CBD is positive as the market continues to rebound.”

Brisbane CBD

Matthew Kearney – Head of Office Leasing, QLD

• “The decline in vacancy rates is due to the strong momentum in tenant activity observed last year continuing into the first half of this year, and limited new supply entering the market. New supply is only projected to become available in late 2024.”

Perth CBD

Jemma Hutchinson – Head of Office Leasing, WA

• “The Perth CBD office market has experienced some fluctuations to vacancy, however, this is mainly due to supply side impacts, particularly from B-grade stock, that is likely to be withdrawn for refurbishment.”
• “Despite many economic headwinds over the past year, WA has proven resilient and continues to prosper, due to strong leasing demand off the back of significant infrastructure investment and a record high for WA exports in the year to May, which represents a 13.8 per cent increase on the year to May 2022.
• “Our robust resource sector strengthens Perth’s buoyant and counter cyclical market. These positive indicators have resulted in increasing office demand, positive net take-up and rental growth, which will continue to lead to a declining vacancy trend moving forward.’’

Adelaide CBD

James Young – State Chief Executive and Head of Office Leasing, SA

• “Although supply side pressures are placing upward pressure on vacancy levels, we expect this to subside over the second half of the year and into 2024 as the end of the current supply cycle comes to fruition.”   
• “Gross leasing activity remains robust with transactions up by around 64% (by area) when comparing H1 2023 to H1 2022.”  
• “The recent signing by Deloitte for 7,000 sqm at One Festival Tower is a significant deal in the market, however, we note that Deloitte’s occupation date is expected to be late 2024 and will therefore not be counted in PCA figures at this point.”
• “A further example of strong leasing activity is the State Government’s commitment to 11 Waymouth Street (approx. 3,000sqm), which is backfill from the former ANZ tenancy, with an early 2024 commencement.  Both these deals are a prime example of the continued flight to quality underpinning leasing activity in the A-grade segment of the market.”

Canberra

Aaron Bruce – Director Office Leasing, ACT

• “Office demand from the private sector remains active in Canberra in the first half of 2023 and will likely continue for the rest of the year.”
   
• “Demand from the government sector will also remain robust, driven by the announced ongoing funding of government initiatives in the 2023-24 Budget. Additionally, the DFAT and the Department of Infrastructure are actively seeking A-grade office space.”