“But the drivers are much different now than during the GFC,” he said. “Back then it was all about job losses, not tenants going from building A to building B.”
CBRE reports that Sydney sub leases hit a five-year high in the June quarter, rising to 70,244 sq m from 28,706 sq m in the March quarter. “The reshaping of the workplace and the war for talent has seen businesses readily commit to new accommodation while carrying a lease tail commitment,” said CBRE director for office leasing Chris Fisher.
“The ability to offload their space at attractive underlying rentals provides the confidence to carry this leasing risk.”
In Melbourne’s CBD, JLL has tracked about 40,000 sq m of available sublease space – equivalent to 0.8 per cent of total stock and still well below the ten-year average of 1.1 per cent.
Knight Frank associate director Finn Trembath puts Melbourne’s sub leasing at 0.7 per cent of the market, up from 0.3 per cent in January and a three-year high. At the zenith of the GFC Melbourne subleasing peaked at 1.3 per cent.
In the B Grade sector, sub leasing has ticked up to 1.8 per cent as of July 2019. “The last time it was this high was 2004 when it was 2 per cent,” Mr Trembath said.
The drivers are much different now than during the GFC.
“But again, we are talking low numbers.”
In Sydney, the downsizing Bauer Media had advertised for tenants for some or all of its 4500 sq m of space at 54 Park Street, the former spiritual home of Kerry Packer’s Consolidated Press acquired by the German publisher in 2012.
But Mr Dunlop said the subleasing mandates had more to do with consolidation activity, or tenants moving to new developments.
Having taken over rival insurance broker Jardine Lloyd Thompson, Marsh & McLennan has 3000 sq m of redundant space at Grosvenor Place, ahead of the merged firm’s planned move to Barangaroo.
At 59 Goulburn Street, the Department of Environment and Planning is seeking to sublease 11,000 sq m ahead of moving to Parramatta Square.
In Melbourne, KPMG’s recent acquisition of insolvency firm Ferrier Hodgson has resulted in 1400 sq m of excess space at the latter’s old premises at 600 Bourke Street.
BHP has offloaded 1700 sq m of space in 171 Collins Street, with an internal tenant believed to be taking the space.
The JLT-Marsh & McLennan merger has also released 2700 sq m at 570 Bourke Street.
“Sublease activity in Melbourne is at very low levels,” said JLL joint head of Victorian office leasing Nick Drake. “Those availabilities that do exist however tend to be from a mix of merger and acquisition activity as well as general downsizing.”
Mr Drake said that given the low vacancy levels and tenant preferences for an existing fit out, “any good quality sub leases that come to the market tend to be very well received.”
Mr Dunlop said that with rental discounts 10 to 30 per cent below the going rate, subleasing was an attractive prospect for tenants happy with an existing pre-loved fitout and a short lease.