The Office Market Accordion Keeps Playing
The office market accordion keeps playing, and Adelaide is a good example. The recent JLL graph below for the Adelaide office market highlights that competitive rents and incentives have enticed some tenants back to the CBD over the last few years. Demand has been positive because incentives have been positive. Flight to incentives? This has occurred in almost all capital city markets.
As the better quality buildings fill up, landlords hold rents and decrease incentives. The tenants notice and start to look elsewhere in the same market but on a different street. There is plenty of stock and choice for tenants to do so; especially in Sydney and Melbourne.
Some believe “non-core” properties are going to suffer. But non-core properties are still located in the CBD and have similar or better amenities, location and ESG credentials than some of the premium buildings. The difference now is they are offering more compelling and competitive commercial terms.
When these sectors start to fill up, perhaps the tenants will revert back to the core when the rents decrease and the incentive increase to entice them back again.
The joys of the markets, the wheel turns and, the office market accordion plays on.