Smaller is bigger in CBD office markets
The growth of start-up and technology businesses is fuelling a change in Australia’s CBD office landscapes, experts say.
Smaller tenants are now driving office demand, with more than half of the companies that are seeking space in Sydney on the hunt for spaces smaller than 500sqm.
A Colliers International CBD office report found there has been a “significant growth in small-to-medium size enterprises looking for space”, with lease enquiries for offices of less than 1000sqm now accounting for 83% of all enquiries, up from 71% just six years ago.
Colliers International national director of research, Nerida Conisbee, says there has been a shift in the way businesses look at office space, in a bid to react faster as they grow.
“Owners are responding to these changes with the way that they lease space, develop buildings and plan for the future of their buildings,” Conisbee says.
“This is more a cyclical element, given the long leases that large corporations typically take.”
Conisbee says newer and smaller companies will continue to dominate key sections of the office market in the coming months and years.
“We expect to see a wave of part-floor users enter the market over the next two years as a large number of these leases expire. The number is expected to be much higher than single-floor and multi-floor users over the next two years,” she says.
Owners are recognising where the largest pool of potential tenants lie and are being proactive in meeting the market
“We therefore expect that it will not just be new tenants entering the market that are after smaller tenancies, but also existing users looking for new space.”
Colliers managing director of office leasing, Simon Hunt, says there is already evidence of building owners changing the internal layout of their properties to attract and cater for smaller tenants.
Sydney CBD buildings including Chifley Tower, MLC Centre, 45 Clarence St, 6-10 O’Connell St, 25 Bligh St, 10 Spring St and 55 Clarence St had already benifited from speculative subdivision and fitouts to allow them to offer smaller spaces, Hunt says, while Melbourne I isn’t far behind.
“In Melbourne, we first saw the trend of floors being speculatively split up in order to attract smaller tenants occurring in secondary grade buildings. Now owners of prime grade buildings – including Investa at 120 Collins St – have split vacant floors into smaller tenancies,” he says.
“Owners are recognising where the largest pool of potential tenants lie and are being proactive in meeting the market.”