An impressive show of strength by Australian labour markets is set to drive promising growth in demand for office space in major CBD markets across the nation and drive a faster than anticipated post-Covid recovery.
According to a new report from Colliers, Australian CBD office markets are well positioned to bounce back from the challenges of 2020.
“The positive numbers we are seeing in the latest labour force data are pointing to a recovery in net absorption sooner than we initially anticipated, particularly in Sydney and Adelaide,” Simon Hunt, Managing Director of Office Leasing at Colliers, said. “Capital city jobs growth is still lagging in the rest of the states, but there appears to be a recovery in sight.
“Our office markets are well positioned to come out of this challenging period in better shape than a lot of people realise. We are already approaching around 7 or 8 o’clock on the property clock, which is a significant improvement on what many had expected.”
According to Colliers’ new CBD Office Research & Forecast Report, Australian labour markets have seen an extraordinary recovery following a crisis unlike any other.
Kate Gray, Colliers’ Director of Research, said almost a year on from the first COVID-19 outbreak, payroll data to February 27, 2021 showed jobs growth increased 0.4% compared to the prior year. However, the pattern of job losses had not been equal across all industries.
‘”The sectors which have contributed to this growth are Public Administration and Safety, Finance and Insurance, Administrative and Support Services and Education and Training, with most of these sectors being above Pre COVID levels” Ms Gray said. “All of these industries a key contributor to office demand, another positive sign for the recovery of office-related industries.”
The growth for office demand has not been evenly spread across the country with ACT, SA and WA seeing the strongest growth. “Green shoots are definitely emerging in
Australia’s labour markets with an expected flow on effect to office demand,” Mr Hunt said. “Office demand industries across all states now showing a 1% positive change, primarily due to a recovery in Victoria where we have seen a -0.8% change compared to -3.3% last reporting period (13 Feb 21).
“South Australia has also showed a strong result reporting jobs growth of 5.2% compared to 2.8% last period. NSW moved to positive territory also reporting 1.2% compared to -0.1% last reporting period. By State, the largest changes were in Queensland and Western Australia – both up 0.6%.
“Although finance and insurance sectors have driven growth, it is interesting to note these sectors have contributed to a substantial portion of sublease. There are still some factors at play which are still impacting office demand.
“The work from home trend could see some downsizing and result in sublease, however we are finding that many businesses are taking a wait-and-see approach.
“Businesses are wanting to make decisions which support long term growth and a place where the workforce can collaborate is an important part of that strategy. This may mean in the medium term more space could actually be required to allow for social distancing, larger meeting rooms and more collaborative spaces.
“Early evidence of this has been seen in reports that several large law firms are already bucking the trend of shrinking office space and increasing their commercial tenancies as they upgrade to bigger or newer premises.”
