AI Set to Drive Demand for Nearly 500,000 Sqm of Additional Office Space in Australia by 2030

New research by JLL has found AI could reshape the Australian office market.

JLL, a global leader in real estate services, has released a report on the impact of Artificial Intelligence (AI) on Commercial Real Estate (CRE), highlighting Australia’s emerging role in the global AI landscape and its potential to transform office markets.

The report, The Impact of AI on CRE, found that AI adoption could drive demand for an additional 483,000 sqm of office space across Australian CBD markets by 2030.

JLL Research analysed a range of forecasts, pointing to AI’s economic contribution towards the global economy increasing from under 1% in 2024 to 13% by 2030.

Ronak Bhimjiani, JLL Real Estate Economist, said: “Greater AI adoption globally will result in productivity gains over time, therefore resulting in higher economic output. While some job displacement will inevitably occur along with greater AI adoption, we have identified new roles that will need a skilled labour force over time. On a net basis, expectations largely support further jobs growth over time.”

Based on job growth projections as well as assessing U.S. office market data, increased AI adoption is set to reshape Australia’s office market landscape.

“While forecast job growth is expected to surge, we are already at the cusp of a transformational change within the labour market, with the number of workers within the AI space growing significantly over the last 10 years. Furthermore, Australia’s office AI penetration rate is also expected to catch-up to global standards, resulting in greater office space take-up across major CBD markets.

“Already housing a significant number of companies in need of rapid AI advancement and large skilled workforces, Sydney and Melbourne are poised to become clusters for AI companies. Furthermore, the growth prospects from large technology companies who are early AI adopters is also looking promising,” Mr Bhimjiani said.

Key findings from the report include:

• Australia ranks 15th globally on the Global AI Index.
• AI jobs in Australia are projected to surge by 500% between 2023 and 2030, adding 166,400 new positions and driving demand for an additional 483,000 sqm of office space.
• 76% of AI jobs advertised are in Sydney and Melbourne.
• Out of the top 52 AI companies by market capitalisation globally, 37% already have a presence in Australia.

The report draws comparisons with established AI hubs, particularly in the United States. While San Francisco and Silicon Valley speak to how a clustering effect has driven significant office demand and take-up within the region.

Will Hamilton, JLL Head of Office Leasing – NSW, said: “The rapid growth of AI companies in the U.S., particularly in areas like San Francisco and Silicon Valley, signal a significant opportunity for the Australian office market. We are seeing leasing volume from AI companies in the San Francisco Bay Area continue to grow, consistently over 10% of total leasing volume since 2020. While Australia’s AI market is still developing, we’re positioned to capture strong growth.”

U.S. tech startups are increasingly considering Australia within their top five locations for global expansion. Out of the top 52 AI companies by market capitalisation globally, 37% already have a presence in Australia, highlighting the country’s attractiveness as an AI investment destination.

The global AI investment trends observed have significant implications for Australia’s commercial real estate sector. As more international AI companies look to establish or expand their presence in Australia, increased demand for office space is anticipated, particularly in Sydney and Melbourne CBDs, which currently host 76% of AI companies in Australia.

Bianca Docker, JLL Head of Growth, Office Leasing – Australia, added: “Forward-thinking landlords who embrace the AI revolution stand to gain a significant advantage. By strategically positioning assets, they can be first-movers in attracting a new wave of tenants. This includes offering AI-focussed flex space incubators for start-ups to scale within their portfolio, as well as considering AI clustering, positioning assets close to key infrastructure including Data Centres and tech hubs.”

The report also highlights challenges and opportunities for Australia to solidify its position as a major global AI hub, including expanding data centre capacity, addressing network infrastructure and latency issues, and developing a skilled IT workforce.

As AI continues to reshape industries and drive economic growth, its impact on commercial real estate in Australia is set to be transformative, presenting significant opportunities for forward-thinking investors, developers, and occupiers.