Australia: Don’t write off the office

Commercial office vacancy rates should drop sharply in the next two years as Australia emerges from COVID lockdowns due to high vaccination rates, increasing employment and a decline in the popularity of work from home, according to AMP Capital research.

While office occupancy rates have been decimated in some capital cities by the response to COVID, history shows that office occupancy rates bounce back faster than expected after significant downturns.

"Do not underestimate the speed and magnitude of an upturn. Over the past 40 years, the Australian office market has experienced five major downturns," said Kylie O’Connor, AMP Capital head of real estate. "While all of them had different causes, the effect on demand for office space was relatively similar, and so were the subsequent recoveries.

"In all cases, market corrections were followed by a strong rebound in office demand. The Sydney and Melbourne CBDs recorded an increase in occupied space of 5.6 percent