Australia Flexible Office Space Market - Growth, Trends, COVID-19 Impact, and Forecasts (2023 - 2028)

Australia Flexible Office Space Market - Growth, Trends, COVID-19 Impact, and Forecasts (2023 - 2028)

During the time frame of the forecast, the Australian flexible office space market is expected to grow at a CAGR of more than 8%.

• The growth of large tech companies in Australia is a key sign that flexible office spaces should be bought.Twitter, Apple, Amazon, and Atlassian are becoming buzzwords in the property world. These companies are taking up significant amounts of space in the leading Australian property markets. Many companies implemented business continuity plans, with post-COVID-19 options being considered and implemented. When considering a post-COVID-19 company plan, choosing flexible office premises and working hours is essential. Post-pandemic, co-working spaces will gain huge demand.
• Since flexible working has become more common, people are less likely to work in the city center and more likely to look for work-near-home options. Employees save time and money on travel and have a better balance between work and life. Companies get an edge when it comes to attracting and keeping top talent while making CRE more efficient. This scenario is being played out across Melbourne, with demand for flexible workspace doubling in 2021 compared to 2020 in popular suburban regions such as Box Hill, Hawthorn, Heidelberg, and Richmond. After the recent openings of centers in Richmond and on St. Kilda Road late last year, a new site in Balaclava is planned to open in 2024, becoming their third city-fringe location.

In the coming years, all major cities in Australia are expected to see massive development of flexible working space.Companies are more interested in acquiring dedicated and secure private offices for one to 100 employees.While remote working will supplement future workplace methods, it will not completely replace them. Large corporations, in particular, still require a central headquarters to strengthen their brand and culture. In Q1 2021, 18% of all flex space inquiries in Australia were for 10+ workstations, while demand for 1-2-person offices fell by 14% since Q1 2020.

In the last two years, there has been a shift toward larger companies using flexible space, while smaller companies have gotten better at working from home. Large floor plates are now available from a number of flexible workspace providers. This makes it easier for corporate firms to use flex space, which was hard to find in the past. Also, businesses can take advantage of cheaper flex workstation rates in Central Business District (CBD) areas, which lets them get high-quality space in a central location for less money. The increased provision of larger spaces and floor plates within the flexible market and relatively lower rates are proving to be advantageous for companies looking to occupy agile workspace.

According to Source, despite market uncertainty, face rents in Sydney, Melbourne, Brisbane, and Perth were constant or higher in Q3, indicating new and higher quality property coming online. While increased incentives across the country are limiting future effective rental growth, net absorption within better grade supply and significant pre-commitments indicate that the flight to quality is still on.

In the Sydney CBD, premier face rentals increased by almost 2% in the third quarter to average USD 925 sqm, owing to the opening of new premium space, such as Quay Quarter Tower, and the restoration of A-grade structures. In the face of rising vacancies, prime incentives remained strong at 34%. As a result, gross effective rents increased by roughly 2% during the quarter, representing a 4.8% year-on-year increase.

While inquiry levels in the Melbourne CBD office market were up year on year, many larger clients opted for shorter-term extensions. Prime incentives are stabilizing at 39%, but are around 2% lower than in 2021. Prime net effective rents continued to average USD 410 sqm in Q3, a 5.3% rise year on year. Gross face rentals in all office classes in Brisbane CBD increased in Q3. Higher incentives have mostly compensated for this, with prime incentives currently averaging 42%. This resulted in prime gross effective rental increase of 0.6% in the third quarter to USD 460 sqm, and 3.1% year to date.

The flexible workspace market in Australia is already very fragmented, with 80% of the supply coming from providers outside of the top ten. This wide range of products is getting bigger as the number of traditional landlords who offer flex is quickly growing. The epidemic has transformed their perspective regarding flex, and they now consider it a strategy to stay competitive. Several landlords have partnered with operators, including Hub Australia, Ucommune, and The Work Project, but an increasing number are entering the market on their own. The Loft at South Yarra was just opened by Goldfields Group.

Some of the major players in the market include Servcorp, Flexible Workspace Australia (FWA), Hub Australia, The Commons, and Tank Stream Labs.

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