CBD office rents bottoming out


Research from Cushman & Wakefield reveals that Sydney prime CBD office rents declined by 3% in the June quarter to be at $665 a square metre. This represents a fall of 24% on a net effective basis since the beginning of 2020.

By comparison, Melbourne prime CBD office rents were at $380 per square metre at the end of the June quarter, having been $455 a square metre in March 2020. Whereas Brisbane prime CBD office rents were stable in the June quarter after declining sharply the prior quarter:

“I think we’re getting close to a bottom” [said Cushman & Wakefield’s head of research John Sears]…

“If you look at things like business conditions – the NAB survey, the stockmarket, capital expenditure intentions – they’re all good leading indicators of office demand, and they’ve all been really strong.

“Our leasing teams are also seeing better demand, but there is a caveat. The better demand is, generally speaking, from the smaller tenants”…

“There’s a cyclical upswing, if you like, but it’s being tempered by structural change toward greater flexible working.”

My prediction is that office demand and rents will remain soft for several years. The virus continues to linger and the structural shift towards working from home means businesses will require less space going forward.

Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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