Workspace flexibility to shape future office markets

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This was published 8 years ago

Workspace flexibility to shape future office markets

By Carolyn Cummins

To accommodate the changing office market, landlords are now allowing the negotiation of different lease terms, including growth option and length of stay.

Demand is rising for the smaller work spaces of about 200 square metres, as the city is seeing an inflow of small to medium consultants, accountants and recruiters, all of which have differing needs in a lease.

36 Hickson Road, Sydney, where Gensler was granted first right of refusal on the 130 square metre office space above its current tenancy.

36 Hickson Road, Sydney, where Gensler was granted first right of refusal on the 130 square metre office space above its current tenancy.

Agents said the ability if the landlord to make a lease more flexible is leading to a lower overall vacancy rate.

This was evidenced by the recent sublease space data which saw a drop, in the second quarter of this year, of 14 per cent in total volumes, across the country.

According to CBRE, there was a 22 per cent fall in Sydney, a 10.3 per cent decrease in Melbourne and a 59 per cent decline in Canberra.

CBRE regional director office services Andrew Tracey said improving conditions were apparent in Sydney and Melbourne as result of increasing occupier demand and business confidence levels.

"In Sydney, the drop in sublease availability is a clear indication the office market is strengthening, with the CBD receiving a third of new listings during the quarter, originating from business expansion as tenants outgrow space," Mr Tracey said.

In Melbourne, availability dropped by 10.3 per cent to 75,800 square metres. With a large amount of space offered by Medibank Private leased over the quarter, the information sector has over taken finance & insurance as the largest provider of availability.

Strengthening demand for office space with flexible sizing options has underpinned a lease deal at Hickson Road in the Sydney CBD.

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CBRE Office Services Associate Director Ben Cohen said tenants were increasingly attracted to buildings that offered them the ability to expand their floor space to support future head count growth.

"Some landlords are providing flexibility for growth by allowing tenants to have first right of refusal over additional space in office buildings," Mr Cohen said.

At 36 Hickson Road in the Sydney CBD, international design firm Gensler was granted first right of refusal on the 130 square metre office space above its current tenancy.

"Due to Gensler's strong covenant and brand profile, the landlord provided further flexibility by agreeing to a shorter than usual initial term of two years, with a one year option," Mr Cohen said.

He added the rise of communal meeting spaces was another emerging trend, with tenants opting to pay on a per-use basis opposed to having internal space within their tenancy.

"Serviced office companies have been the traditional space solution providers for tenants with future growth plans and have been able to offer shorter term leases, as well as additional pay-per-use meeting space," Mr Cohen explained, citing new co-working start-up in the USA WeWork as an offshore example.

"This is being seen as the new 'Uber' of office space, where tenants become members to utilise office facilities and also take advantage of the community atmosphere and networking opportunities."

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