Guess which Australian city saw the largest fall in sublease availability in Q1

Sublease availability in this city fell 24% during the quarter.

First quarter results reflect the growing confidence of Australia’s office occupiers, with indecision and caution – hallmarks of the pandemic – starting to leave the market.

CBRE’s latest Sublease Barometer report has revealed sublease availability across the nation is currently totalling 417,030sqm; however, new sublease additions have begun levelling out from previous peaks in all markets. 

Whilst sublease availability remained high in the first quarter, particularly in Melbourne and Sydney, Adelaide recorded the largest fall over Q1 (-24%), followed by Sydney (-6.5%) – and availability in Brisbane, Perth and Melbourne continued to expand, recording increases of 11.6%, 3.4% and 0.5%, respectively. 

CBRE’s Head of Office Leasing for Pacific, Mark Curtain, said with several large sublease transactions pending, he expects the sublease market to peak in 2021 (total sqm) and gradually reduce over the back end of the year to pre-pandemic levels.

“The challenge of future workplace occupancy remains on the agenda, with the emerging trend in hybrid workplace models – a trend that will see occupier's future real estate portfolios defined by flexibility, in terms of workplace format as well as lease terms,” he continued.

“An increase in desk ratios could also have a positive effect on sublease withdrawals as occupiers readjust their use of office space and initial expectations of space reductions are diminished.”

CBRE’s Head of Office Occupier Research, Joyce Tiong, said contraction remained the primary driver for sublease across all CBD markets, but that relocation and consolidation had taken increasing shares – attributing 17.5% and 3.4% of total sublease space nationally in March, compared to 16.2% and 2.9% in December.

Generally, sublease space levelled out across most industries – except education and training (up 124%); transport, postal and warehousing (up 73%); and manufacturing (up 17.6%).

Construction, administrative and support service and utilities service businesses were the top three industries recording the largest percentage falls by 53%, 41% and 22% over the same period. 

By size range, the sub-500sqm bracket made up the bulk of the available sublease by the number of tenancies, the 1,000-2,000sqm segment continued to expand and increased by 23% across 58 tenancies (compared to 49 tenancies in December), and the over 2,000sqm bracket recorded a 9% fall across 51 tenancies (compared to 55 tenancies in December).