Tech firms leveraging conditions to expand office footprint

THE technology sector is stretching out across the Sydney CBD, levelling up to higher quality and larger spaces as the benefits stack up.

According to JLL’s Tenant Perspective report for 2Q22 financial firms are leading the sector’s occupation growth, particularly fintechs and challenger banks, as the Sydney CBD office vacancy rate is reported at 13.0% for the quarter.

For Premium-Grade office buildings the vacancy is at 11.9%, while A-Grade vacancy is at 13.6% and B-Grade is at 14%. JLL also reported Premium-Grade vacancies as “fragmented”, with only single floor leases or just part of a floor available.

This come’s after last month’s reports of the Melbourne CBD hitting its its highest office vacancy level since the turn of the millennium after repeated lockdowns left demand at its lowest level on record, at 10.4%.

Technology companies are expanding their footprint across the city after experiencing significant growth over the pandemic.

“Gaining an edge in the war for talent, improving brand image, cost efficiencies and a better working environment are the key benefits these firms want from high-quality real estate,” said Sadaf Mayar, senior director of tenant representation at JLL, NSW.

Companies seeking to reap these rewards include a payments and business banking provider that leased 6,300sqm at 55 Market Street, almost doubling its floorspace at a previous 3,800sqm office in Clarence Street.

Luke Dutton, senior director of tenant representation at JLL, NSW, also noted a cyber security tenant who moved from a 200sqm York Street office to a much more significant 3,200sqm space at 2 Market Street.

“Workplace strategy is varied among tech firms. Some companies are moving to hybrid work models as they enable productive, diverse and inclusive talent ecosystems necessary for the digital economy. On the flip side, some other organisations like have focused in on operational efficiencies and taken a remote-first strategy,” added Mayar.

Over the quarter prime net face rents have remained unchanged since the same time last year at $1,262/sqm, while secondary net face rents increased 2.0% over the same period to $926/sqm.

“Rent-free periods, rent abatement and landlord contributions to fit-out are common features of new leases with headline incentives remaining elevated well above long term averages,” said Dutton.

Outside of just Sydney, all Australian capital cities saw office space net absorption of 143,500sqm over the quarter, up massively when compared to last year’s fourth quarter total of just 21,399sqm.

“Given the high levels of supply in most markets, good quality tenant covenants are highly sought after by landlords. The current market presents a great opportunity for tenants to leverage the conditions. Time in market is critical for this and we would recommend tenants engage early to gain maximum exposure to market opportunities,” concluded Dutton.