The future of office space
The future of office space in Sydney is exciting for owners according to Knight Frank Australia, who also revealed the current trends in the market.
Kymbal Dunne, Director of Office Leasing, and Alex Pham, Senior Research Manager at Knight Frank Australia, recently held a webinar with REINSW to discuss Sydney’s commercial office space. Watch it here.
Kymbal said: “It's a very dynamic and lucky time if you're the owner of property or office space in the Sydney CBD. For a tenant, or occupant, it's a troublesome time because there aren't many options.”
Alex revealed that the Sydney CBD comprises of about five million square metres of office space, with the vacancy rate only 5.9% in August.
The supply ranges from premium A grade down to D grade, with a lot of Sydney buildings built in the 1970s starting to come to the natural end of their life. More than 36% of the Sydney’s CBD commercial stock is pre-1980s vintage.
Kymbal explained: “We're starting to see an emerging trend of a hybrid class called prime grade, which is what developers see as a market niche. They believe if they can build an A grade building and provide premium grade quality services, they are elevating themselves above what is being offered.”
He added that other trends include fibre optic cabling, solar use, lift destination, and casual parking amongst others.
Use of space
Alex explained: “The most important trend that we’re seeing is the shrinking of office space per person that will impact the serviceability of the buildings, as they serve more people in the same amount of office space.”
What new tenants want
Kymbal said: “We're seeing large companies wanting efficiency and space, and to reduce their costs, at the same time as getting the best and brightest people.
“The desire to have a business based in or close to the city has become popular again and tenants are seeking socialisation opportunities, including things like gyms, retail, end of trip facilities and concierge services.”
The rise of co-working
Alex explained: “Space is getting more densely utilised which has given rise to the co-working industry. Sydney co-working's base has grown exponentially, some61% per annum over the past five years.
“There's around 50,000 square metres of co-working space in the Sydney CBD, and the growth is showing no signs of slowing with the amount of space expected to grow 40% by 2018.”
This includes the NSW Government’s commitment to lease 17,000 square metres of co-working space at the Wynyard Green building.
Ownership structure changing
Alex said: “Over the past 10 years the ownership structure has changed dramatically for Sydney. Australia’s office space is viewed as high and our public ownership structure is seen as attractive, sophisticated, and transparent.”
Currently around 30% of properties in Sydney are held by foreign owners, up from 10% five years ago.
Knight Frank Australia’s figures also show that 50% of Sydney CBD's office staff are controlled by 11 landlords with the biggest owner, Dexus, controlling about 10%.
Projects of the future
Kymbal said: “We think there will be more Asian-style developments happening in the future. We see a mix in comprised of cafes, retail shops, wellness activities, etc, and potentially a hotel component. This would be split between short stay in the lower part, followed by office space in the middle and permanent residential above.
“It is a complete multi-use concept within one building and we see that emerging more as owners get more comfortable with that kind of ownership.”
He added: “The future's exciting, and there's a lot of things that are going to be taking place in our office environment which will improve in the way we use space, interact with space, and give us more convenience.
“Buildings are going to be tools for us to connect and have other social experiences.”