If the city seems busier these days it is because there are more office workers and residents around, as reflected by the decline in office vacancies across Sydney and Melbourne.
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The Property Council of Australia’s Office Market Report for the six months to July shows the average vacancy rate at 8.5 per cent, down from double-digit figures recorded over the same time last year.
The fall is a combination of employment growth in traditional city jobs at law firms and banks, a new wave of tenants from the information technology industry such as Google and the conversion of office towers into apartments.
It also defies the amount of new building across the cities, including Barangaroo in Sydney and Docklands in Melbourne, where companies are consolidating staff into new modern towers. The older buildings are then being converted to apartments where possible.
Property Council NSW executive director Glenn Byres said Sydney’s level fell to 8.4 per cent from 9 per cent over the six months to July, which indicated demand was positive across the Sydney CBD market for the second straight period.
“The signs of life in the CBD office market are consistent with other data pointing to an improved economic outlook for Sydney and NSW,'' Mr Byres said.
''The most recent Property Council/ANZ Property Industry confidence survey shows sentiment in the NSW industry the highest in the nation,’’ he said.
Knight Frank national director of research Matt Whitby said national office markets faced difficult leasing conditions last year, with strong contractionary influences dominating the markets. Following negative growth in 2013, full-time jobs have increased every month this year, which has seen tenant mobility and confidence improve.
“With much of the negative influences now in the past, not only are inquiry levels building but there is a slightly increased willingness to take action within a reasonable time frame,’’ Mr Whitby said.
The rise in demand from tenants such as Google, Wotif, Amazon and LinkedIn had also led to a fall in office supply, agents said.
Jones Lang LaSalle's head of office leasing, NSW and Australia, Tim O’Connor, said the office market was at an interesting point in the cycle.
‘‘Business conditions are improving within the finance and insurance sectors on the back of broader economic positivity across NSW,'' Mr O'Connor said.
''This will be also supported by an increase in activity from tech companies looking for a CBD presence, as well as further centralisation activity.’’
The Victorian executive director of the Property Council, Jennifer Cunich, said positive demand was helping drive down Melbourne’s already low vacancy rate.
‘‘Our city presently has the second lowest vacancy rate amongst all of Australia’s CBDs of 8.5 per cent, down from 8.7 per cent,’’ Ms Cunich said.
Hamish Sutherland, Knight Frank’s national director for office leasing in Victoria, said recent Melbourne CBD market activity had been positive with inquiry levels boosted by larger corporates moving into the CBD, continuing the ''flight to quality'' trend observed in recent years.
“General market sentiment also remains positive as tenants continue to review their work space striving to achieve optimal efficiencies and increase staff collaboration,” Mr Sutherland said.
The North Eastern and Docklands precincts continue to have the lowest vacancy rates in Melbourne, at 2.7 and 4 per cent respectively. There is no space in the pipeline for Southbank or St Kilda Road in the short term.
