Australia: Flight to quality occurring but secondary markets may not be doomed
Office markets across Australia have been experiencing a flight to quality accommodation over the last 12 to 18 months. This has been driven by several factors including a strong labour market and resulting competition for employees and the prevalence of hybrid working arrangements. This has led tenants to seek high-quality office space that provides superior amenity and flexibility to attract staff back to the office and cater to shifting return-to-work/office requirements.
- Comparing the historic performance of prime and secondary office rents demonstrates that secondary markets catch-up when the market tightens as not all tenants can afford to be in prime office space.
- The latest Property Council data highlights the recent flight to quality, showing negative net absorption for secondary office space across Australian CBD markets.
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