This article is from the Australian Property Journal archive
INCREASES in office supply and sublease availability are expected to put downwards pressure on flexible office rents as major operators such as Hub Australia, The Executive Centre, and The Great Room by Industrious all expand their footprint in Sydney.
Findings from Rubberdesk’s Q2 Flexible Office Space Report show rates have remained unchanged nationally in the June quarter at $650 per desk.
“However, with a 6% increase in office supply and a number of new spaces coming to market, prices are expected to come under some downward pressure,” it said.
After a strong start to the year, tenant demand also fell partly due to businesses with existing leases staying put or downsizing to smaller leased spaces.
There is 179,745 sqm of vacant flexible office space nationally, up 5.7%. The number of vacant offices dipped 0.6% to 2,529, while the number of vacant workstations listed 6.5% to 31,451.
“Coworking spaces have faced stiff competition recently due to the rising number of office vacancies in CBD areas and the attractive incentives offered for leased fitted spaces,” Jim Groves, co-founder of Rubberdesk said.
“Tenants now have a greater variety of options and less urgency to commit, resulting in a market where premium and vibrant office spaces with excellent features can be found on flexible terms.”
In Sydney, desk rates rose by 2% to $980 during the three-month period, along with a 13% quarter-on-quarter increase in the availability of flexible office space.
Prices outside the Sydney CBD remain relatively unchanged from the previous quarter with the exception of Parramatta which jumped 8% to $825 per desk while Manly dropped 12.5% to $700 per desk. While Sydney’s CBD offices tend to attract a premium, there are more economical options in Darlinghurst, Surry Hills, and North Sydney with rates of $861, $775, and $549 per desk respectively.
The latest JLL statistics for the “traditional” CBD office markets showed positive net absorption of just 13,400 sqm was recorded across in the June quarter, while the national vacancy rate was unchanged at 14.4%. In the nation’s two biggest markets, vacancies rose 0.7% to 14.4% in Sydney and by 0.6% to 16.2% in Melbourne.
Sydney has more than 38,000 sqm of the nation’s flexible office space, and Melbourne 37,580 sqm.
Melbourne’s CBD flexible working space market continued to experience mounting pressure on vacancy rates, resulting in a 1% decrease in the cost of office space to $695 per desk per month. South Melbourne, Collingwood, Docklands, and Southbank recorded substantial price drops ranging from 5% to 12% quarter-on-quarter.
The Brisbane CBD saw a 4% price increase to a new high of $702 per desk per month. Continued upwards pressure on rates is expected as the supply of new offices remains limited in the coming year and as vacancy rates tighten.
Outside the CBD, desk rates were mixed with prices in Bowen Hills and Fortitude Valley down 2% to 4%, reaching $547 and $527 per desk respectively. Prices in South Brisbane and Milton were unchanged.
In Perth, where the commercial real estate market is tight and new supply is limited, desk rates for coworking spaces remained steady at $700 per desk. While some offices cater to larger enterprise teams, the Perth market primarily serves teams of 10 or fewer, with 90% of available offices falling within this range.
Desk rates in Canberra reverted back to their long-term median of $500 per desk per month, while there was a 12% jump in supply.
Meanwhile, in Adelaide, where the supply of flexible office spaces is also limited and no new openings have occurred over the past year, desk rates have experienced their fifth consecutive quarter of growth reaching $650 per desk, for a 17% increase on the same time last year.
