Small-office suites tipped to surge in popularity after the coronavirus crisis has passed
Small-office suites are tipped to surge in popularity after the coronavirus crisis has passed, as tenants opt to secure their own spaces rather than be with other businesses in an open-plan environment.
Inquiry for small-office leases generally has fallen during the pandemic, but some industries were using this time to cherry-pick the best deals and locations, according to experts.
Cushman & Wakefield NSW head of metropolitan office leasing George Harb said demand for small offices had decreased over the past two months, with most tenants opting to stay put due to the economic uncertainty.
However, after the crisis had ended, it was likely that the coworking model that was previously in demand from small tenants would be “under immense pressure”.
“Smaller tenants, sub-300 square metres, were the main users of coworking space, and social distancing measures have put the coworking model under immense pressure, changing the way people view their workspace,” Mr Harb said.
“Some of the coworking sub-tenants may not continue to work from home once lockdown measures subside and are more likely to require their own office space either in the CBD or more affordable metropolitan areas.”
He said once social distancing restrictions eased, there could be significant opportunity to lease office space to smaller tenants.
Cushman & Wakefield head of north shore office leasing Giuseppe Ruberto said outside of the Sydney CBD, two of the most sought-after locations were North Sydney and Parramatta for small office spaces.
Mr Harb said the difference in rents between the CBD and suburban locations also made these precincts popular with tenants.
“The North Sydney market has experienced a period of solid rental growth, due to constrained supply conditions across Sydney,” Mr Harb said.
“With strong rental growth over the past year, prime net face rents increased 5.9 per cent over the past 12 months and 4.7 per cent on an effective basis.”
However, growth had not kept pace with the CBD in recent years, with North Sydney rents currently 31 per cent lower on an effective basis, he said.
Colliers International North Sydney director-in-charge Dan Walker said North Sydney in particular was likely to benefit from increased demand from small to medium-sized businesses seeking their own spaces or more traditional serviced offices.
He said this was a direct impact of the coronavirus, with businesses prioritising staff safety.
“North Sydney offers rents which are more cost-effective compared to the CBD and stock that is more suitable to smaller businesses due to average floor plate size, allowing our clients to subdivide whole floors to cater to these users,” Mr Walker said.
“We are also seeing our clients who own these buildings adapting to the current market and becoming more flexible with lease terms.”
He said tenancies of three to five years were currently not the norm with clients generally considering shorter two-year terms to limit vacancies.
Colliers International office leasing associate director Chris Baltussen said inquiry for sub-150-square-metre offices within the Parramatta CBD had remained strong, with businesses searching for cost-effective rents.
Plus, industries such as law, engineering and education providers were using the slowdown to secure the highest quality spaces, he said.
“Typically, these tenants have a presence in Sydney’s CBD and hope to create a high-quality satellite office without putting their staff in a situation where they feel forgotten or short-changed,” Mr Baltussen said.
“During COVID, privately owned businesses seem to be the most active as they attempt to take advantage of distressed opportunities and secure above-market incentives and below-market rents.”
