In 2024, the Australian commercial real estate market is experiencing diverse trends across office and retail classes. Office lease lengths have stabilised after a five-year decline, indicating tenants have clarity on their requirements in the new world of flexible working. This is also accompanied by landlords' willingness to offer favourable terms in order to secure longer lease commitments.
In retail, blue-chip retailers are committing to 10-year leases in prime locations, while secondary markets are adopting short-term leases to minimise vacancies. Although not returned to 2019 levels, the slight upward trend shows renewed confidence in physical stores from retailers.
Average Lease Lengths: The average office lease length in Australia has held steady at 29.8 months in Q1 2024, a slight increase from 29.5 months in Q1 2023. This stabilisation follows a period of decline influenced by the rise of flexible office providers and work-from-home trends post-pandemic.
Tenant Preferences: There is a noticeable shift towards high-quality, prime office spaces, driving rent growth for these assets.
Landlord Strategies: Landlords are increasingly offering favourable terms to secure longer lease commitments and avoid vacancies.
Term Length Distribution: Leases of 1-3 years and 3-5 years have seen a 10% increase, while shorter leases (12 months and under) have declined by 9%. This indicates a growing preference for moderate-term leases amidst ongoing economic uncertainty.
Average Lease Lengths: The average retail lease length in Australia was 38 months in Q1 2024, up from 37 months in Q1 2023. This slight increase reflects renewed confidence among retailers in the value of physical stores.
Prime vs. Secondary Locations
“The Australian commercial real estate market presents a mixed outlook. The office sector is stabilising, with lease durations remaining consistent for two years. Retail is experiencing growth, highlighted by the resurgence of long-term leases from major retailers, indicating confidence in the enduring value of physical stores. However, we also see a rise in short-term retail leases as under pressure retailers are unwilling to make a long term commitment in a challenging economic environment.”
— Tom Wallace, CEO Re-Leased
This data has been collected, anonymised and aggregated from over 80,000 active Australian tenancies. All data that has been aggregated for this report is in line with the Re-Leased Terms and Conditions as at the time of publishing.
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The Australian commercial real estate market presents a mixed outlook. This report provides lease length data to help the industry make informed decisions and benchmark performance.
