PODCAST: Why Australia is bucking the trend on office demand

Don’t believe everything you read about office occupancy on social media because real estate data indicates appetite is strong in the cities, analysts say.

Companies’ headcount growths are having a positive impact on office demand in Australia, with higher quality buildings – such as those offering ‘statement’ lobbies, social spaces and wellness features – filling up especially fast.

“We recorded 43,000 square metres of net absorption over the first quarter of 2023 and 124,000 sqm over the past 12 months. That’s below pre-COVID demand, but still a positive result,” says Andrew Ballantyne, head of research, Australasia, JLL, who was speaking on the Perspectives podcast.

“If you look at some other mature economies, you’re not seeing this level of strength in the office leasing market that we are here in Australia,” he adds.

The results can be attributed to strong employment, which is coming off peak levels seen over the past 12 to 15 months, but still elevated.

“Most organisations that you speak to have pulled back their recruitment plans, but they’re still looking to attract and retain knowledge workers who can help grow their business over the medium to longer term,” Ballantyne says.

The build-to-rent, or multifamily residential sector, is another part of Australia’s real estate market on an upwards trajectory due to extremely low residential vacancy, and inward migration that is almost back to pre-COVID levels.

The recent federal budget announcement to reduce a withholding tax on BTR investments from 30% to 15% from July 2024, will align the sector with some offices, hotels and student accommodation, and boost the appeal of the nascent asset class, Ballantyne says.

Meanwhile, industrial real estate will continue to be the industry’s ‘golden child’ until normalisation returns around 2024 to 2025.

“Clearly 40% growth per annum is not going to be sustainable over a longer period of time,” Ballantyne says.

Hear Andrew Ballantyne’s observations on the office, residential and industrial markets in the latest episode of JLL’s Perspectives Podcast.