Office outlook improves as workers return to workplaces

Photo: Katarzyna Białasiewicz.
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VICTORIAN private and public sector workplaces will be back at 75% capacity from Monday, as the hard-hit Melbourne office market plays catch-up with the rest of the nation.

The cap had only been increased in recent weeks to allow 50% of private sector and 25% of public sector workers back to the office.

Premier Daniel Andrews yesterday announced the acceleration of the state’s staged return as it recorded a 27th consecutive day without any recorded local transmission of COVID-19.

Melbourne’s CBD had been left empty for much of 2020 as the city endured two harsh lockdown periods. The second re-opening phase ran into the late-year holiday period.

“I think now, given the success we’ve had… 27 days of zero cases – and every confidence that we can maintain this if we all keep playing our part – it’s now appropriate for us to have both the public sector and the private sector on an equal footing,” Premier Andrews said at yesterday’s press conference.

“What that means is that’s more people buying coffee, more people buying lunch, more people going out to restaurants and bars, all those things – which is all about jobs.”

The Victorian Chamber of Commerce and Industry welcomed the government’s announcement.

“It’s fundamental to every workplace across the state and we can now move ahead with confidence to bring more workers back and get that collaboration and in person engagement humming,” chief executive Paul Guerra said.

City of Melbourne pedestrian data showed foot traffic in the CBD is at a 10-month high, but still far below pre-pandemic levels.

The CBD’s office market recorded negative 68,200 sqm of net absorption in the final quarter of 2020 as vacancy grew further to 13.2%, according to JLL figures, while witnessing an increase in sublease availability amid uncertainty for businesses.

Further pressure on the Melbourne office market is expected in the form of the largest influx of new supply in almost three decades, although Amazon’s commitment in December to anchor a new $1.5 billion Charter Hall tower offered some cause for optimism.

National outlook brightening

The increase in capacity for both the private and public sectors in Melbourne marks another step towards Australia’s major office markets operating at high capacity in sync.

Australia’s largest office landlord, Dexus noted that office building occupancy levels – being the proportion of people actually in the office on a daily basis – remained below pre-COVID levels at the end of 2020. Peter Studley, Dexus general manager, research said government guidelines, multinational sentiment and concerns about public transport were the biggest deterrents.

“The risk of further clusters means it may take some time for work practices to move back towards pre-COVID levels.”

Dexus believes leasing markets across the country should generally improve in 2021.

“After an uncertain year for office markets, an improvement in many of the key leading indicators signals a period of strengthening demand ahead,”

Business conditions were at their highest level since 2018 in the NAB’s December business survey, while professional job advertisements have grown over the past month, as has white collar employment.

Face rents nationally held relatively steady in the December quarter, however, effective rents fell significantly on the back of increasing incentives.

“The growing availability of space and competition to maintain occupancy suggests incentives will remain elevated for a considerable time,” Studley said. “The anticipated end of the JobKeeper subsidies in March 2021 will be keenly watched, with small to medium sized occupiers more likely to be affected.”