Sydney records positive office net absorption for the first time in five quarters

Net absorption also improved in Perth and Brisbane.

According to Dexus Research, demand improved in the March quarter nationally and a positive aggregate number now seems likely next quarter. 

“While weak net absorption of 56,200 sqm for the Melbourne CBD in Q1 2021 was an improvement on the previous quarter, a more active leasing market in the Sydney CBD meant that the net absorption was positive (+57 sqm) for the first time in five quarters. Net absorption also improved in Perth and Brisbane.”

Here’s more from Dexus Research:

A flight to quality was evident, with Premium grade vacancies falling marginally in Sydney, Melbourne, and Perth. However, total vacancy rates rose in the March quarter. Sublease vacancy in the Sydney CBD fell from 3.3% to 3.2% of total stock, with some sub- lease space being withdrawn.

While face rents across CBD markets held steady, more competitive incentives saw effective rents fall. Positively, falls in effective rents were less pronounced than in the previous quarter. Fringe markets, except for North Sydney, recorded effective growth in the March quarter, on the back of steady incentives and some face growth.

While physical occupancy levels are rising across CBD markets nationally there remains considerable ground yet to cover. Multinational sentiment and public transport concerns remain the biggest challenges for a return to offices. Much depends on the pace of the vaccine rollout this year.

A robust lift in lead indicators points to substantial improvement in leasing demand in 2021. Business confidence in February was at the highest level in 10 years. Professional job advertisements continue to rise, up circa 40% from the lowest point last year and surpassing pre-COVID-19 levels. Strengthening white- collar employment points to improving net absorption sooner than expected, with a strong historical correlation between white-collar employment growth and office demand.