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PCA Office Vacancy Market Commentary - Tenants unite in Flight to Quality Quest

Jess Freeman • 04/08/2022


Tim Molchanoff, Cushman & Wakefield’s Head of Office Leasing - Australia & New Zealand said nationally leasing demand in the core markets has remained solid in H1 2022, despite higher interest rates, inflation, and geo-political tensions. 


“The demand has been driven by the war-for-talent, with unemployment at its lowest level in over 40 years, tenants are looking through the current sentiment, while taking advantage of the relatively high incentives on offer, to secure quality space to help them retain and attract talent” he said.



Antonia Foweraker, Cushman & Wakefield’s National Director, NSW Head of Office Leasing said a flight to quality continues to drive overall tenant demand in Sydney. “Over the past six months tenants are generally expanding and upgrading, with nearly three quarters of tenants looking to move into higher quality space as staff attraction and retention remains front of mind.


“This dynamic has benefited high quality spaces in central locations while demand has been less buoyant for some metro markets and lower grades of office buildings” she said.


Chas Keogh, Cushman & Wakefield’s National Director, Joint Head of Department, Office Leasing Victoria said In Melbourne, the standard of office accommodation being added to the market is significantly superior to older stock, adopting a higher standard of Environmental, Social, and Governance factors that tenants now highly consider when deciding on a new workplace, particularly when also implementing new hybrid workplace practices.


“The higher net absorption rates across the superior quality graded space generally suggests that this is occurring, particularly as tenants still enjoy healthy incentives for new leasing terms.


“Despite the City of Melbourne’s pedestrian data suggesting that the visitor numbers into the CBD remain at levels circa 65% of pre-covid, there is a concentration around amenity rich areas.


“These areas tend to be core CBD where retail tenants continue to trade, particularly those with improved dining options to support the corporate white-collar workers. Well located office accommodation in well located areas of amenity continue to attract tenant attention” he said.


Ben McKendry, Cushman & Wakefield’s National Director, Head of Metropolitan Leasing Office Leasing, Victoria said “Flight to Quality is the standout tenant driver for 2022 as companies battle to attract the best talent and keep them engaged enough to come to the office on a daily basis.


“Companies are taking advantage of market conditions to move into brand new or fully refurbished assets in amenity rich locations and access to public transport is also critical” he said.



Billy Miller, Cushman & Wakefield’s Director, Head of Office Leasing believes Brisbane CBD vacancy has tapered slightly over the past six months to July.

“We continue to see a flight to quality, with demand for premium space expected to account for over half of all demand across the CBD.

“With record low unemployment rates, the war for talent continues and employers are looking for ways to retain staff. A flight to quality provides this, with higher quality fit outs and more amenity providing incentive for employees to 1) come back into the office and 2) remain with their employer” he said.


Roly Egerton-Warburton, Cushman & Wakefield’s Director, Head of Leasing, WA said “As we head into the new FY, the market remains highly active. Demand is very strong in core, fringe and suburban markets.


“Amid rising interest rates, inflation and a correction in the financial markets, tenant demand has continued to grow at an impressive rate.


The mining and energy sector and State Government are driving activity, as are professional service firms choosing to relocate to Premium Grade assets to secure the best talent” he said.



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