Australia’s office market recovers with strong growth in 3,000 square meter sector

Strong demand for 3,000 square meter plus office space is driving healthy activity and growth across Australia’s office sector as the market looks towards 2015, according to new figures.

The Colliers International Office Demand Index quarter three report has recorded a 51% increase in enquiry for office space nationally at 626,237square meters, compared to the September 2013 quarter figure of 413,538 square meters.

According to Simon Hunt, Colliers International managing director of Office Leasing, the growth in office demand, a barometer for the state of the market, was being driven by enquiries within the 3,000 square meter plus market, which increased 126% from only 147,301 square meters in the September 2013 quarter to 332,500 square meters this year.

Some 47% of all enquiries recorded for September year to date was for 3,000 square meters or more. Breaking the figures down further shows the greatest spike in demand for office was in Sydney where space enquired for more than doubled from 102,486 square meters in the third quarter of 2013 to 235,660 square meters in the third quarter of 2014, an increase of 130%.

‘These Sydney numbers have been driven by a significant rise in demand for office space in the above 3,000 square meter market where only 29,601 square meter was enquired for in the third quarter of 2013 compared to 114,800 square meters in the third quarter of this year,’ said Hunt.

Demand for office space also doubled in Canberra, with 112,600 square meters in the third quarter of 2014 compared to 58,090 square meters in the third quarter of 2013, again driven by enquiry in the 3,000 square meter plus market.

The Office Demand Index also recorded positive signs of increases in demand in Adelaide, up from 29,251 square meters in the third quarter of 2013 to 49,920 in the third meter of 2014 and Brisbane, which rose, quarter on quarter, from 47,095 square meters to 53,687square meters.

Enquiry in Melbourne was down from 166,785 square meters in the third quarter of 2013 to 150,851 square meters in the third quarter of 2014, primarily driven by increased activity at the smaller end of the market, where 65,063 square meters was recorded in the under 1,000 square meter market in the third quarter of 2013 compared to only 51,001 square meters In the third quarter of 2014. The over 3,000 square meter market, however, saw an increase from 53,500 square meters in the third quarter of 2013 to 61,700 square meters in the third quarter of 2014.

Hunt said the growing enquiry levels nationally for space over 3,000 square meters pointed to a strong period of business expansion driven by white collar employment growth in the corporate sector.

White collar employment growth was set to be strongest in the Financial Services, IT, Communications and Healthcare sectors, with national forecasts indicating that over 10,000 new jobs would be created in these sectors in 2015.

It was anticipated that the mining, government and manufacturing sectors would have slightly weaker growth, due to consolidation. Melbourne was forecast to have the fastest rate of white collar growth in 2015, with a net gain of 6,000 new jobs, with Sydney close behind on 4,000.

In total, the Office Demand Index recorded 1,981 enquiries overall for September year to date, for a combined total of 1,740,009 square meter of space. This represented a 1% increase in volume compared to 1,960 enquiries year to date in September 2013 and a 10% increase in space enquired for, up from 1,576,111 square meters for the same period last year.

‘The amount of space leased by Colliers International agents across the country is also on the rise, with a significant increase recorded for 2014 year to date of 324,937 square meters compared to the same period in 2013 when it was 286,197 square meters,’ Hunt said.

‘In terms of the volume of deals done, we are also looking at a significant increase from 416 at this time last year compared to 519 deals year to date in 2014,’ he added.

He pointed out that the firm is seeing the Information Technology sector remaining very active, with 161 enquiries for 196,819 square meters year to date. This time last year this sector was also the most active with 185 enquiries for 132,443 square meters of space.