Smaller cities outperform in the sublease office stakes

4 July 2023

Australia’s smaller capital city office market are outperforming their larger rivals when it comes to the availability of sublease space following a faster return by workers in these locations.

CBRE’s latest Sublease Barometer highlights that sublease space in Brisbane, Perth and Adelaide now represents less than 0.5% of each city’s total office stock, a fraction of the current availability in Melbourne (2.2% of total stock) and Sydney (2.4%).

CBRE’s Head of Office Research Tom Broderick noted, “The smaller markets have observed lower availability for several reasons. The return to office and physical occupancy has generally been better in these markets. Also, the average tenant size is smaller, and generally it has been the larger occupiers who have looked to consolidate their footprints. These markets also have less exposure to financial and technology companies, which have contributed the most to the sublease market of late.”

Nationwide, CBRE’s data shows that sublease availability edged higher in Q2, rising by 0.6% to 258,576 square metres to represent 1.6% of total office stock.

Sydney experienced the largest q-o-q increase, with the quantum of sublease space now representing 2.4% of stock, up from 2% in Q1. The reverse occurred in Melbourne as lease deals reduced the volume of stock from 2.4% to 2.2%.

However, it’s the smaller capitals have taken the lead, with strong leasing conditions in Brisbane seeing the city’s availability drop to represent just 0.3% of stock – the lowest level nationally.

Perth’s sublease availability dropped by almost half to 0.4%, with a buoyant economy limiting the amount of tenant contraction, while Adelaide’s availability remained relatively steady at 0.4%.

 Adelaide CBDBrisbane CBDMelbourne CBDPerth CBDSydney CBDNational
Jun-235,650sqm7,507sqm112,998sqm7,831sqm124,590sqm258,576 sqm
q-o-q Change550sqm– 4,439sqm– 9,075sqm-5,831sqm20,238sqm1,461 sqm
y-o-y Change750sqm– 10,145sqm-25,948qm673sqm27,692sqm– 6,978 sqm

From an industry perspective, the Q2 Barometer shows that the finance and insurance sector continues to be the largest contributor to national sublease availability, accounting for about 29% of the total.

However, this has trended down as the major banks and insurance firms gain main clarity on their office footprint requirements.

Professional services companies such as law and accounting firms have showed a more positive trend, with sublease availability dropping by approximately 38%. These business’ have seen strong revenue results over the past two years and improved physical occupancy.

CBRE’s Pacific Head of Advisory & Transaction Services Mark Curtain noted, “The more assertive return to office plans by major corporates is likely to drive sublease lower as physical occupancy improves. Most sectors have already observed a steady decline in sublease space coming to market over the past year. The Technology sector is the one exception to that trend, given the well publicised cost cutting measures by some of the larger firms.”

The steady increase in technology, media and telecom firms offering space for sublease has been part of the reason why Sydney has observed an uptick in availability of late.

“The struggle for these tenants to attract staff back to the office has been one factor, although, more recently it has been more of a function of cost cutting, particularly for US headquartered firms,” Mr Curtain said.



Sydney – Chris Fisher, Director, Office Leasing  

The recent increase in sublease space comes as businesses embrace flexible/hybrid working arrangements. Combine this with economic headwinds and a desire to cut costs and offloading under-utilised office space is an easy solution.

However, it is certainly not a blanket approach across the CBD, with the majority of tenants moving to increase their footprint.

The tech sector, which has embraced hybrid working, is where we are seeing sub-lease space increase. A number of tech firms “banked” space when they were growing exponentially, which they no longer need. 

Large corporates also feature, with their slower return to work edicts resulting in surplus office space, with M&A activity being another driver, leaving some space redundant as businesses merge their operations.

The pleasing part is there is activity in the market and healthy turnover in the sublease space. Whilst decision times are slower, underlying demand is strong and the benefits of sublease space with quality fitout and below market rent is being embraced by sections of the market.

Melbourne – Ashley Buller, Head of Office Leasing, Victoria

Over the past 12 months, a consistent trend has emerged in Victoria’s commercial real estate market. Many of the largest deals, excluding pre-commitments and new building deals, have been finalised in

sublease space. Docklands, in particular, has emerged as a prominent location for these opportunities, offering large floor plates, modern fitouts, attractive commercial terms for tenants, and long lease-tails.

What’s noteworthy is that a significant percentage of tenants securing these sublease options are those seeking to centralise their operations. They are relocating from suburban and metro locations into the city, resulting in positive net absorption for the CBD.

The availability of large floor plates, combined with new and appealing fitouts, makes Docklands an enticing choice for companies seeking to optimise their workspace and accommodate their growing needs.

The tenant-friendly commercial terms and long lease-tails further contribute to the desirability of these sublease opportunities.

Brisbane – Chris Butters, State Director, Office Leasing

Brisbane’s sublease vacancy remains at historical lows, as the vast majority of the city’s occupants are either in a holding or expansionary phase.

Brisbane’s office market has a limited exposure to companies downsizing globally, such as major IT, software or banking/finance organisations, providing insulation from this mass reduction in space utilisation.

Further fuelling the downward trajectory of overall sublease volumes is the increasing appetite from government, engineering and resource related businesses seeking immediate fitted out accommodation for growth and or/project-based requirements.

Looking forward we do not anticipate any major spikes in sublease availability in the near term. That said, those options which do materialise will be met with a reasonable level of enquiry.

Perth – Andrew Denny, Senior Director, Office Leasing

Perth has negligible sublease availability, with a near record low volume of just 7,831sqm. This reflects strong occupier demand which shows no signs of abating.

There is particularly strong demand for quality fitted space, which many sublease options provide.

Expanding tenants remain the dominant theme in the market. This is almost entirely due to Western Australia’s strongly performing mining sector, and its flow on impact to many other business sectors.

For the first time in many years Perth is also experiencing strong demand from both the Federal and State Governments, with multiple positive net absorption requirements.

Any sublease space entering the market with a high quality fitout is likely to be leased relatively quickly.