History tells us that office occupancy will recover as employment recovers, says Colliers International managing director of office leasing, Simon Hunt.
Three key takeaways:
It may be too early to determine the direct outcomes of COVID-19’s impact on the office market, but Colliers International’s analysis of past market interruptions suggest that office space will continue to grow.
Hunt has worked through the global financial crisis, SARS and the introduction of activity-based working, “which were all predicted to drastically change our approach to working in the office”.
Each time, markets “bounced back” and “office space has experienced exponential growth,” he said.
Hunt says Colliers’ enquiry data, when compared to previous years, is “slightly down but in total they are quite stable”.
“In fact we’ve been tracking our enquiries weekly and the week of 15 June we recorded more enquiries and more area than the same week in 2019 – so there is proof that occupiers are now becoming more active in the market and will continue to look for space,” Hunt says.
According to Colliers research, Australian CBDs have added 1.7 million sqm of office space in the last decade.
Anneke Thompson, Colliers’ national director of research, says secondary grade space was the most occupied space until 10 years ago.
“Since July 1993, when the data series began, the occupancy of prime grade space in CBDs has increased by 150 per cent or 5.3 million sqm of additional space occupied. Remarkably, the occupancy of secondary grade space today is exactly where it was in July 1993, despite providing a cheaper alternative for occupiers.”
Thompson says this statistic underscores the value that businesses places on prime grade office space to boost productivity and performance.
Office environments bring immense value to culture, collaboration, wellbeing, social interaction and mentoring – influences that cannot be emulated at home.
“One of the clearest correlations we have found as researchers of office markets is the relationship between white collar employment and prime grade occupancy; when overall employment increases, office occupancy also increases,” Thompson says.
Colliers research is backed up by a new report by JLL, which foresees an “earlier pathway” to pre-crisis commercial property transaction volumes than experienced after the GFC.
JLL’s head of capital markets in Australia, Fergal Harris, says transaction volumes are likely to fall “sharply” in 2020, but “unprecedented policy measures” have supported global equity markets.
Harris says a “clear hierarchy” is emerging, with “prime grade industrial and logistics and commercial office proving to be the most resilient sectors”.
Hunt, meanwhile, says 30 years of data serves as a timely reminder.
“Value remains a key priority for occupiers and we expect this trend to continue.
“As demand recovers it’s our view that occupiers will be seeking prime grade buildings that offer efficient floor plates, the best technology solutions, health and wellness space and flex options as we move into an environment where there is a greater uptake of flexible working,” Hunt concludes.