[+] Coworking Proving Office Sector’s White Knight

Rents are rising and the bums are on seats as coworking spaces become the favourite in the back-to-office stakes. While the national office vacancy rate is increasing slightly in the main markets of Sydney and Melbourne, the popularity of coworking is bounding ahead. The Australian Flexible Office Space Report released by Rubberdesk in March revealed requests hit a peak in March from businesses in the sub-150 staff category. Furthermore, prices for desks in Melbourne, Brisbane, Adelaide, and Canberra all experienced quarter-by-quarter increases of 5 per cent or higher, while Sydney remained steady. The addition of a coworking space in CBD office towers is a winning move, according to tenant advisory director at Collier’s Justin Lam. “The importance of flexibility and added amenity in buildings is critical for tenant requirements, as the workforce is looking for better quality workspaces than their home offices,” Lam says. “By having a third space operator in the building, landlords, owners and prospective buyers of office assets in turn are able to capture a wider tenant pool, as their asset offers meeting rooms, event spaces and offices on demand to cater for tenant needs. “Coworking spaces/third spaces are an important piece to the makeup of a building stack. ▲ Inside The Commons coworking space at 388 George Street, Sydney ( also pictured top ). “Tenants are demanding more flexibility and amenity in offices as the ‘flight to experience’ (amenity plus quality) trend continues.” Lam says the long-heralded flight to quality for office space was the reality of today, and that includes coworking spaces. “Despite the Melbourne CBD vacancy rate being 13.8 per cent, there has been a split in the market, with prime grade options leasing well and B-grade options falling behind,” he says. “Similarly, in the coworking sector, higher-grade, quality, well-located offerings continue to lease well, whereas secondary coworking spaces are not performing to the same level. “Most operators with newer and high-quality spaces are experiencing high occupancy levels which demonstrates the strength of the market.” Rents, however, are increasing with the report saying that larger offices for teams of 50 or more staff had a 23 per cent rate increase across the second half of 2022. Sydney CBD costs now sit at $958 a desk, however, in North Sydney this price drops dramatically to a price range between $550 to $600 a desk, though there are some offering as low as $400 a desk. The amount of flexible office spaced in Sydney increased by 15.5 per cent quarter on quarter. ▲ The Commons George Street in the Sydney CBD. “Sydney has the strongest demand for coworking spaces, which has been partly driven by the demand from large enterprise clients seeking to relocate and downsize post-pandemic, as well as a quick recovery for their CBD,” co-director and founder of The Commons, a coworking space provider, Cliff Ho says. “Melbourne coworking spaces are also performing well and are fully occupied. “Coworking is becoming more popular in Brisbane, Adelaide, and Perth, but the demand is not yet as high as in Sydney and Melbourne. “Throughout the peak of Covid, we remained very confident in the future of coworking in Australia. “We signed four new deals during the pandemic because we had complete faith in the post-pandemic growth of the sector. “Our confidence has paid off as we are currently experiencing waitlists for offices in most of our locations and have had a significant increase in membership enquiries this year. “Across the sector, strong demand for flexibility has resulted in higher overall occupancy rates.” The Commons’ new sites include a $13-million flagship Sydney CBD location at 388 George Street, which offers 50-person office suites complete with private kitchenettes and meeting rooms. ▲ The cafe in The Commons Surry Hills. An additional floor opened at George Street in March, taking The Commons’ footprint in the building to 5100sq m and adding capacity for 262 new members. The Commons had more than 500 membership and event space inquiries in January this year, a 71 per cent increase year on year. And Australia is in a better space than the US market, Ho says. “Our work-life balance is better, and Australians value coming into the office and collaborating, which has helped to boost the demand for coworking spaces,” Ho says. “Australia also offers a greater range of smaller coworking spaces that are tailored to their local community, which helps draw staff back into the office with spaces that truly suit their individual needs.” Coworking spaces are also expected to start specialising into specific segments such as coworking for parents and creative coworking, allowing greater marketing potential, while expanding target reach. “The future of coworking is like that of hotels—there will be different brands and styles, and not one brand will fit all businesses,” Ho says. “I expect we’ll see continued strong demand from larger companies seeking to downsize. “One of the many benefits of coworking spaces is their ability to quickly adapt to market demands, and they will continue to be flexible to meet the changing needs of businesses of all sizes.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. 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[+] Coworking Proving Office Sector’s White Knight

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