The lower cost of living and the flexibility provided by increased remote working options in suburbs have attracted a significant number of tenants to move away from urban cores. This fundamental shift could be a long-term trend, as we have observed insufficient signs of people returning to major commercial hubs almost one year after the pandemic.
Whilst A grade commercial space in urban cores continues to suffer from rising vacancy rates, B and C grade commercial space, suburban and secondary markets have performed relatively better. The improvement in the absorption rate outside the urban cores demonstrates a behaviour shift in office demand and how employers are reacting to such change in the market trend to attract and retain employees. Based on our latest research, if employees have the option to work remotely, most of them will do so a few days a week. In general, only 30% of the workforce is fully back to work at the office. The labour shortage and low unemployment rate have given employees more power to maintain the flexible work arrangement implemented during the pandemic.
The proximity to cultural hubs, restaurants and entertainment options makes urban offices appealing to those who thrive on the constant hum of city living. On the flip side, suburban offices provide shorter and less stressful commuting and a smoother transition between work and home. Urban offices may boast excellent public transportation options and a wealth of nearby amenities, but the congestion and high costs associated with city living can be significant drawbacks. Suburban offices often provide ample parking at much lower cost.
In fact, the vacancy gap between urban and suburban offices have shown signs of narrowing prior to the pandemic. The technology breakthrough in facilitating remote work and the demographic change manifested in young millennials settling in suburban areas and pursuing life and work balance have translated into a shifting office demand from urban cores to suburban areas. The pandemic has only accelerated the course.
It’s true that ultimately, the choice between urban and suburban offices boils down to individual priorities and preferences. If we are not released from the high interest rate and high inflation, urban offices will continue to be outplayed by suburban offices as almost everyone, whether individually or collectively, are looking for life and business alternatives to save cost. That’s the priority.
If you would like to know more information regarding the Parramatta CBD Office market, read our latest research report or get in touch with our team.