Sydney CBD Office Market Vacancy now to January 2027: Structural Demand
The new component is the “structural demand” which started years ago with the higher adoption of technology to increase productivity. This is the ongoing “connection/disconnection”. Covid not only sped up this adoption, but it and the connection/disconnection have created the next ways of working.
The next way of working revolution has just started and so far, the consensus is that over the longer term, office tenants (the whole of market) will take up less space rather than more. Predictions from market participants range from 10-20% less space over the next 5 years.
That’s a negative effect on vacancy for a while. Call it the “absorption anchor”.
Taking all of that into consideration and as leases expire in the coming years, we think structural demand will be 1.5% for 2022 and 2023 and increase to 2% per annum thereafter to January 2027.