7 May 2014 — Demand for office space is declining even as the amount of space under construction is increasing, new research from property valuation and advisory Propell has found.
The report found less office space per capita was needed in Australia, as structural changes wrought by the internet, computers and mobile phones made large offices redundant.
It also found that most demand was for A and B grade buildings, however demand for C grade buildings was also strong, as companies looked to cut costs.
The resource boom had led to an oversupply of office space in Perth and Brisbane, and the Docklands development in Melbourne had left the rest of the market with reduced demand.
This oversupply of office space was predicted to last for the next decade, leading to reduced rents and values in many markets.
Other findings included:
- Demand for office space is reducing back to 1990s levels, driven by a weaker economy, further cutbacks in public demand expected from the forthcoming federal and state budgets, and structural demand changes as the internet and the cloud change work practices
- The office markets have between 10 and 20 years’ supply of vacant or new stock
- Vacancy rates are expected to increase over the next five years while rents are expected to fall
- While the office market has long been the darling of investors, the future is not necessarily a mirror of the past and we may have to rethink the extent of office space provision, its quality and location
Read the full report.