Commercial Real Estate Australia’s Post

What does 2025 have in store for the office market in Australia? Big question with a lot riding on it for owners and investors. The bottom of the market has been called for Sydney with positive leasing demand and capital market activity. Brisbane, Perth and Canberra also seem to have stabilised. Melbourne remains the problem child due to tax regime and softer leasing market. What remains consistent throughout is demand is high for premium, energy efficient buildings in prime locations. So what does the future hold for secondary grade assets? Will work from home trends persist and continue to weigh on valuations? What sort of collaborations between policy makers, landlords and tenants to get employees back to the office more often are working and what more can to be done? Is investor confidence in the market returning and who's on the hunt for opportunistic buys? You can get the answers to all these questions and more at the 5th annual Future of Office Space Summit, taking place in Melbourne this March 20th. Hear from industry heavyweights such as Peter Menegazzo, Matthew Brown, Fiona Denison, Anjana Moran, CFA GAICD, Sarah Dowd and over 30 others and get all the strategic insights you need about Australia's office market outlook. You can see full program and speakers, and buy your tickets here: https://lnkd.in/gZJnekj9

Interesting article from Michael Bleby looking at the return to office. Andrew Ballantyne’s feedback that subleasing is at a 3 year low is a great sign the office market has stabilised and we are preparing for growth. Worth a read. JDS

Though there is some optimism that the worst is over for office, given the apparent stabilization of vacancy rates, it is worth noting that about 40% of the office space tenanted at the beginning of the pandemic hasn't yet matured, according to CoStar Group. It seems we are likely in the middle innings of this game. #commercialrealestate #officebuildings #vacancyrates #cre #distressedassets #distresseddebt https://lnkd.in/eEwavbjy

"Canberrans and Melburnians are proving more reluctant to return to the office than workers in other cities, with the two capitals so far embracing greater work flexibility" Read full article: https://lnkd.in/gqxiCCeC The Australian Financial Review #commercialrealestate #business #returntowork #returntooffice #office #strategy

This is an interesting debate to read in detail. Good to see it acknowledged by certain members that providing working patterns that can support: 🔹 Those with Caring responsibilities. 🔹 People with mental and physical health issues. 🔹 Individuals from different socioeconomic backgrounds is part of creating a wider and more diverse workforce. https://lnkd.in/e-Ffy6rF

The office sector is showing signs of stabilizing now that more companies are requiring five days a week in the workplace. One-third of companies required full-time office attendance in the third quarter. That is up from 31% in the second quarter and ends a five-quarter streak of declines in the rates of companies requiring five days a week. But distress in the office market will persist even if the worst is over. The office vacancy rate remains near record levels and defaults on office-property loans continue to rise. "The vacancy rate is stabilizing at a near record level of 13.8%, up from 9.4% in the fourth quarter in 2019. Since the second quarter of 2020, U.S. office tenants have vacated close to 209 million square feet of space, the highest amount ever for a four-and-half-year period, according to data firm CoStar Group." "Defaults and other missed payments also continue to rise. In September, the delinquency rate of office loans converted into securities increased to 8.36%, the highest rate since November 2013, according to data firm Trepp."

"Nearly one-quarter of all US #office space will be vacant by 2026 as working from home persists, slicing commercial-property values by as much as $250 billion, according to a report from Moody’s." Both Moody's and McKinsey & Company agree that workers need less space per worker than was the case pre-pandemic; should productivity hold steady, it's unlikely that return-to-office rates will improve much from current levels. Without employment growth from larger firms, it's hard to imagine that occupancy levels rise in the near term, particularly as there's some evidence #labor markets are beginning to slow. To wit: today's release of continuing claims for #unemployment insurance (w/e Jun 15th) rose to highs last seen in Nov 2021. https://lnkd.in/ex-Z8zyB

US office vacancies are north of 13%, signaling serious distress in the office space market and placing immense pressure on banks, insurance companies, and other lenders, The Wall Street Journal’s Peter Grant reports. In addition to encouraging lenders to work with their borrowers to work out repayment plans to avoid broader economic fallout, we must continue to rethink office spaces and encourage workers to return to the office. These actions will also be crucial to strengthening urban centers, boosting small businesses and accelerating our economic growth.

Work/Life 'balance' can't be lopsided to one side, or the other; Covid created some very unsustainable trends. The key is to strike a balance between meeting customer expectations and needs, maximizing productivity and thus earning potential, and prioritizing employee well-being. We can't be too highly leveraged on one side, or the other; and, the equilibrium needs to be brought back closer to center. #sustainabilityofworkandlife

"The traditional way of operating the workplace through rigid, long-term lease structures and hands-off landlords doesn’t stack up anymore for occupiers in search of flexibility and experiential offices. The fully flexible office model, on the other hand, doesn’t always stack up for landlords: management agreements are expensive and they increase operating costs and complexity in advance of revenue generation." Thanks Zac Goodman for this column on a possible middle ground. Can ‘core to floor’ move the dial in a polarised office market? Here in EG https://lnkd.in/etGEN7R3