2021 wrapped and 2022 forecast

December 15, 2021
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Commercial Real Estate

We look back on the (unforgettable) year that it was and give you some insights on what to expect in 2022 across the Sydney, Melbourne and Brisbane leasing markets.

2021 Wrapped

In a continued trend from 2020, the real estate savings opportunities for office tenants got better in 2021, leading to a GOAT year for Tenant CS!  With the uncertainty, businesses turned to independent Tenant Representatives to maximise negotiable savings, and we certainly delivered!

Workspace planning initiatives meant tenants decreased lease sizes, intelligent market data shred rents, and the market leverage we created bolstered incentives. Incentives of 40-60% became increasingly common through Sydney and Melbourne markets, especially when the prevalent sublease opportunities were considered.

2022 Forecast

You’ve heard of long-COVID, so let’s talk about the long-recovery of the property market. 2022 might be different as tenants are confident to make a move, but it’ll stay a tenant market as relocation becomes more common than renewal. With movement, comes leverage. Let’s look deeper across the key Australian city markets:

Sydney

In 2022, much like 2021, we anticipate that face rents remain consistent across all building grades. Active tenants in the market will continue to benefit from landlords’ preparedness to offer above average incentives and other inducements (early access periods, existing fit outs etc). Vacancy rates across the CBD will also continue to hover around the 10% mark, with a dip not expected until later next year.

Melbourne

Melbourne tenants continue to benefit from new office construction supply and will do so beyond 2023. With all new development pre-commitment large occupiers make, a trail of vacancy is left behind. Combine that with so many large occupiers offering full-or-part-floors for sublease, at 50% of the rent on the lease, and vacancy rates are going to stay above 12% for a long time to come with a further 3-4% available by sublease.

Brisbane

In 2022, the Brisbane market will continue to see tenants have the upper hand with large incentives being offered of 45-55%. Whilst 2021 saw a lot of activity by Brisbane standards, the abundance of repositioned buildings in the market means vacancy is expected to vary between 12 to 15%, with sublease space available on top. There remain large blocks of space available as landlords are reluctant to break up space for smaller tenants and want to wait for larger occupiers to fill the market.

While the market might be bottoming out in December 2021 in all cities, high incentives will remain common across all markets. That’s not to say every landlord will offer those rates, some will offer 15% and others 60%.

There are so many variables that determine a Landlord’s appetite to do a deal, and it’s our role at Tenant CS to know the market – we research:

  • What is an individual landlord’s vacancy profile, in that building and in their portfolio?
  • What is the vacancy rate in the surrounding buildings/precinct? and importantly…
  • What are other landlords offering?

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Tenant CS is a tenant advisory service that caters to companies across Australia, Singapore and the greater Asia-Pacific region. We have offices in Sydney, Melbourne and Singapore.

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