De-Densification
For a while there was a lot of discussion about office space supply; undersupply, lack of supply, even “supply crisis”. As often happens, things have calmed down and that is because supply is not really the issue. Demand is thin, and remains so. In many examples office tenants are taking less space –
de-densifying.
One could write several white papers about office space demand, but below are insights from our CREsearch data bank that paint an interesting picture.
Figures are from Property Council of Australia since 1990. The focus is the 10 year annual average net absorption for each of the 6 capital cities. We think 10 years paints a better picture than shorter periods and it is used by most research houses. 5 years starts the decrease in absorption earlier and makes it more pronounced. 6 month figures are too dramatic.
We have 3 different types of cities, each with different pathways to de-densification:
Sydney is on its own and started its de-densification process many years ago.
Melbourne and Canberra peaked at similar times and are slowly de-densifying.
Brisbane, Perth and Adelaide, influenced by resources, have not yet fully started the de-densification process.
There are SO many factors influencing office space absorption but based on the above, de-densification is a process that continues, and each city is on its own pathway.
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