Small Businesses Face Undersupply In Sydney Office Market

Strong tenant demand for small-scale office suites is underpinning a shortage of sub 200sqm spaces in Sydney's sought after CBD market.

CBRE Office Services Negotiator Rosie Origlia said the sub 200sqm sector of the market has seen increasing interest recently, accounting for 41% of enquiries received by CBRE Office Services during the first quarter of 2015.

Ms Origlia said apart from natural lease expiries in the CBD, breakaway businesses and small start-ups looking to be situated closer to their customer bases in the CBD are driving the high-levels of interest in the smaller end of the market.

Ms Origlia highlighted a clear divide between the strong demand for smaller tenancies in A-grade CBD buildings and the options currently available.

[urbanRelatedPost][/urbanRelatedPost]"Despite the increased demand for smaller tenancies, limited quality options are currently available in the CBD, causing many small businesses to re-evaluate or stall relocation plans.""Whilst there are currently 223 whole floor options within the Sydney CBD, only 40 suites under 200sqm are available in premium and A-grade assets," Ms Origlia said.

Anticipating the increasing demand for smaller tenants, DEXUS has had success with a suite strategy across several properties in its portfolio. DEXUS implemented its suite strategy at 1 Margaret Street, subdividing Level 17 to create six tenancies ranging from 90 to 240sqm across 1,164sqm. This approach has been successful and DEXUS has secured tenants for five of the six suites.

"Despite increased interest, some landlords have been hesitant to offer smaller spaces, due to a preference to secure whole floor tenancies," Ms Origlia said.

The increasing demand from smaller businesses is predicted to drive landlords to review their subdivision strategies within buildings, especially for floors that are not gaining much traction.

"Consideration needs to be given to the benefits of splitting up full floors on the basis of achieving high rates and securing occupancy."