The in-demand office spaces investors are seeking out in 2022
With office rents down in most CBDs around the country, businesses from out of town are now viewing them as good value propositions and are negotiating deals to shift to work in city heartlands.
Some big alternative metro areas, like Sydney’s Parramatta and North Sydney, and Melbourne’s Richmond and Cremorne, are at the same time undergoing major redevelopment with new office buildings coming up and older ones being refurbished, which are also proving attractive.
“We’re seeing really good demand in the office market now with a strong inquiry level for the first quarter of this year, which is now only down 10 to 15 per cent on the pre-COVID average in 2019,” said Antonia Foweraker, head of office leasing NSW with Cushman & Wakefield.
“There is still some uncertainty with the pandemic and the Ukraine war, but people enjoy being around people and workers now want to come back into the centres. There’s particularly strong demand too for buildings with advanced digital platforms where everything is connected, and you can work but also book meeting rooms, order lunch from your desk and have your dry-cleaning picked up.”
Ms Foweraker points to the success of Charter Hall’s $6 million refurbishment of No 1 Martin Place as illustrating many of the features of office space considered most desirable by tenants and investors alike. At No 1 Martin Place customers are able to connect directly to the building and adjust the on-floor temperature via an app to suit their individual preference.
The needs of staff, employers and investors in the sector aligned hand-in-glove, according to Kiran Pillai, senior director of capital markets at CBRE. Just as staff are zeroing in on locations where they want to live, work and socialise, businesses are demanding office space there, and investors are focusing on those for the best returns.
“The war for talent isn’t new but it’s now driving a lot of office decisions and we’re seeing some of the fringe markets come into real demand.”
“It’s areas like Richmond and Cremorne in Melbourne, and then sub-markets like Collingwood and Abbotsford that are starting to register with occupiers and investors.
“There are some amazing new quality buildings coming up in these places and often with a consciousness around carbon-neutrality and ESG (environmental, social and governance), which is a concern for occupiers, developers and a lot of investors, particularly ones off-shore.”
Across the country, in Western Australia– the state least affected by COVID and now enjoying renewed interest from both local and interstate investors – there’s also a strong move back to the Perth CBD. Around 40 per cent of the transactions carried out recently by Dustin May, director of office leasing at Cygnet West in Perth, have been in the CBD.
“Companies are now looking for better quality buildings with good amenities and access to transport to make it easier for staff to come back to the office.”
“There’s a strong flight to both quality and centrality,” he said. “The most in-demand office spaces are those in the CBD that are prime grade, well located and with good transport links and amenity, offering value rents and incentives.
“There’s also a big focus on technology from business owners and tenants. They want touchless entry points rather than swipe cards and apps on their phones that give them access to their buildings. We’re now seeing a really strong rebound in office demand off the back of the pandemic.”
