Office market embarks on recovery following tumultuous year

According to John Marasco, Colliers International’s managing director for capital markets and investment services, economic growth is expected to boost activity across the commercial market.

“Many major deals ground to a halt in March 2020, while investors and vendors assessed the impact the pandemic would have on income, in the short term and longer term.

“However, the International Monetary Fund predicts that the Australian national economy will bounce back more quickly, relative to other developed countries.

“These figures, coupled with Australian Consumer Sentiment hitting a 10-year high in December 2020 and a lower than expected unemployment rate of 6.8 per cent, suggest the outlook for 2021 appears to be improving,” Mr Marasco said.

On the mend

In 2020, the office market faced major headwinds, with sales volumes declining by 64.4 per cent on the year to a slim $1.76 billion in March 2020.

However, as consumer sentiment picked up towards the end of 2020, sales hitting a total $4.52 billion were recorded in the last quarter alone.

In fact, while 2019 marked a record year for sales, 2020 was only slightly below the 10-year average, the report highlighted.

“We are still experiencing strong demand for office assets, particularly those that are well located with long leases in place,” said Adam Woodward, head of office capital markets at Colliers International.

Looking at how the office market performed across the individual capital cities, Sydney led the way, accounting for 53.8 per cent of all sales clocked in 2020. In a sign of the extent of the disruption, despite leading the pack, Sydney suffered a 55.8 per cent contraction in sales volume.

Meanwhile, the smaller markets of Perth and Adelaide saw a boost in sales volumes when compared with 2019, with Adelaide clocking record sales.

Canberra, on the other hand, saw no transactions over $50 million, while Brisbane CBD’s sales volumes fell almost 80 per cent, with only one transaction recorded. Melbourne, too, followed the downward trend, with a decrease of 30.1 per cent.

According to Colliers, institutional investors remained the dominant purchaser in 2020, accounting for 77 per cent of all the transaction volume.

Looking ahead, Colliers predicted that as a “significant weight” of offshore capital looks to Australia for investment opportunities, transaction volumes in the office market are expected to soar well beyond their 2020 levels.

Moving forward, adaptable and spacious buildings with the latest in health and hygiene facilities are said to attract high demand.