CBD Office Downcycle Recovery Stronger Than Expected

Australian CBD office markets are coming out of the post-pandemic downcycle stronger than anticpated.

According to CBRE’s latest Australia CBD Office Occupancy Brief, most CBD offices are in a strong leasing position with elevated CBD vacancy rates being driven by a small number of assets.

As of the second quarter of 2023, 62 per cent of Australian CBD office properties had occupancy rates greater than 90 per cent while 15 per cent of properties in these CBD markets had occupancy rates between 80 per cent and 90 per cent.

CBRE’s research shows the share of office properties topping 90 per cent occupancy is consistent across each of the Australian cities, with Canberra having the highest at 66 per cent followed by Sydney at 65 per cent Adelaide at 64 per cent Brisbane at 62 per cent Melbourne at 61 per cent and Perth at 54 per cent.

CBRE research manager Thomas Biglands said that although overall vacancy rates might increase marginally over the near term, well-situated and high-quality office properties would maintain elevated occupancy rates.

“We forecast that the CBD vacancy rate will peak at 13.5 per cent in 2024 due to the final recovery in return-to-work rates in the larger markets and the elevated levels of new supply expected to be delivered over the next year,” he said.

“Following this peak, we expect that vacancy rates will recover gradually as construction slows and leasing demand accelerates.”

CBRE senior managing director, advisory and transaction services Mark Curtain said the lockdown period had forced occupiers to rethink office requirements and necessitated a shift towards hybrid working models, “a move which led to a period of slower leasing activity and rising vacancy rates”.

“Despite these shifts, office market conditions in Australia are reversing course and showing real signs of improvement.

“We are coming out of this period in a much stronger position than general sentiment would suggest.”