The widespread transition to remote work because of COVID-19 meant the commercial office space took a hit, but a resurgence in interest in the market that kicked off in 2021 looks set to continue.
According to John Marasco, Colliers’ managing director of capital markets and investment services, the sector is expected to gain further momentum heading into 2022, particularly as the reopening of international borders removes barriers for international capital.
“We expect transaction volumes to significantly exceed those recorded over the last two years, as we expect more assets to come to market as opportunistic vendors look to sell and [capitalise] on the weight of capital looking for a home across the office asset class,” Mr Marasco said.
But he noted that going forward, investors’ priorities may focus on certain subsectors.
ESG factors such as energy efficiency are proving to be of growing importance, “and may be the deciding factor when choosing between assets for investment,” Mr Marasco said.
And flexibility will continue to be king, with occupiers favouring potential flex-space, driving investors to seek out those highly desirable options.
While open borders will help boost international interest, Mr Marasco said that domestic interest has also been showing its strength, with major institutions and superannuation funds looking to increase their property portfolios in the coming years.
“Australian superannuation funds in particular will continue to invest across most asset classes including office and alternatives. This is further evidence that Australia, its property market and its major property players are well positioned for growth,” he said.
In terms of demand from renters, Colliers have every reason to believe the sector is stabilising. The network ended November 2021 with 3,576 inquiries for 2,926,966 square metres of office space, which represents a 17 per cent increase in the number of inquiries recorded compared to November YTD 2020 and a 12 per cent increase in the area inquired for. They expect this upward momentum to continue apace.
“Deal activity in 2022 will continue to see a return of transactions above 3,000 square metres. Large occupier deals will return as tenants above 3,000 square metres finalise their space requirements and look to solidify their workplace strategies,” Mr Marasco predicted,
He also expects to see large corporates look to new developments with added amenities to fulfil their needs for the years ahead.
“We have all begun to think differently about the spaces and places we work in, increasing the focus on experience and creating best-in-class physical spaces,” Mr Marasco said, explaining that larger companies were at the forefront of making office-lifestyle changes to attract staff.
“The demand for space hasn’t changed, but the way we use it certainly has. The pandemic environment has seen the evolution of a hybrid workforce and this has driven occupiers to reassess what they want and need from their office space. This includes an increased focus on quality amenity, flexible space, health and wellbeing, and cutting-edge technology.”
ABOUT THE AUTHOR
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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