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This 2023 could well be remembered as the year of the Great Office Upgrade – a year that has seen a surge in office vacancies across major cities. Subsequently, tenants have been put in a position where they can capitalise on the market conditions and move their business to better office spaces, in an attempt to win over staff. Gone are the days of working under the stairs, like Harry Potter on Privet Drive, as we’re entering a phase where offices now really need to be in dynamic, flexible and adaptable environments that enhance productivity and employee wellbeing.
In 2023, what I’m seeing right now, is the real need to give employees a strong reason to come to work. These market conditions, which are highlighted in the latest Ray White Commercial Western Sydney (RWCWS) Parramatta Office Report released this month, show that these commercial property markets are fostering fertile grounds for offices to jump on an upgrade.
Here’s what we’re seeing right now, in Greater Western Sydney and abroad, when it comes to businesses looking to capitalise on Sydney’s office crisis:
- Cost efficiencies with rent for higher quality office spaces
The RWCWS Parramatta Office Report released this month confirms that there are almost 26 per cent office vacancies in the Parramatta CBD. No doubt that’s a huge vacancy figure, but certainly something we were expecting.
What we’re seeing off the back of high vacancies is the evolution of the office space, with tenants looking to upgrade because they can take advantage of the market conditions. Many business owners are moving out of secondary buildings and upgrading to prime real estate for competitive leasing agreements. This is something that we’re seeing across most major cities in Australia, however Parramatta’s CBD is in a really unique position for upgrades because it is home to almost 59 per cent of prime office vacancies, which is quite unique.
- Employees demanding better working conditions, if they are not working from home
For businesses that want to entice workers back into the office, certainly there is an appeal for prime office spaces. In fact, many workers across NSW will only really want to return to work if that workspace is seriously enticing. What we’re seeing is that many secondary office assets are currently being upgraded with tenants vacating the spaces to take advantage of prime office spaces.
- The future of office (for many) is green
To support the rise of prime office assets, we know that, for example, many ASX companies need to have buildings with an ESG rating, and prime properties offer this. This market is really favourable of those needs as many new spaces offer these sustainable offerings, as a fairly competitive commitment.
- For investors, there are certainly diamonds in the rough
Parramatta CBD is a world-class location from an investment perspective for businesses that are looking to incentivise their workers back into the workforce, and there are still some diamonds in the rough for sophisticated investors in the office space in Parramatta in particular. There are very few locations in Australia that have what Parramatta has – a thriving suburban environment, access to transport, infrastructure growth that the NSW government is investing hugely in and a thriving cultural community.
Peter Vines is Ray White Commercial Western Sydney's managing director.
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