Sydney loves co-working: big sites dominate
Co-working has surged in Sydney over the past 10 years, with CBD growth outstripping fringe and suburban locations, Knight Frank Australia’s first report on the city shows.
Total space used by co-working operators across metropolitan Sydney has jumped to 44,182 square metres, from just 1400 in 2006, according to the corporate real estate agent’s Sydney Co-working Insight: October 2016 report.
In the centre the increase has been even more stark. Over the past five years, co-working space in the CBD has soared from 140 square metres to 15,674 square metres.
“In the Sydney CBD, co-working and shared workspace has more than doubled every year over the last five years,” said Knight Frank’s senior research manager, research & consulting NSW, Alex Pham. “By the end of 2017, there will more co-working space in the CBD (26,824 square metres) than any other parts of metropolitan Sydney.”
While Sydney has less co-working space than Melbourne’s 58,880 sq m, the NSW capital has larger co-working sites, twice the size on average. Almost three quarters of the total co-working space in Sydney (32,600 square metres) was provided by 15 co-working hubs of 1000 square metre or more each.
“Given relatively higher office rents and operating costs in Sydney, achieving economies of scale is critical for co-working space operators in Sydney,” the report says.
Practical alternative
The growth of the sector in central Sydney is part of co-working’s continued evolution into different offerings serving different market niches. The growing CBD offerings target more established tenants who can afford to pay higher rents for prime sites. They also provide an affordable way to do this at a time when the City of Sydney estimates residential conversions of office towers in the CBD has withdrawn 130,000 square metres of office space from the market since 2012.
“Once catering exclusively for start-ups and freelancers, co-working or shared spaces have now become an attractive and practical alternative to traditional offices for established corporations,” the report says.
Pricing differences are reinforcing the evolution. In the CBD, the monthly cost for a full-time dedicated desk ranges from $625 to $900, with an average this month of $729, the report says. For fringe locations, the average cost was 24 per cent less, at $555 a month. Prices in the suburban market were lower again, averaging $514.
The single largest player in Sydney is one of the newest. WeWork, which opened earlier this month, occupies more than 11,000 square metres at its two sites in the CBD’s Martin Place and the fringe suburb of Pyrmont. WeWork has signed a pre-lease for 4000 square metres at Charter Hall’s newly built 333 George Street, the report says. But home-grown operators are also increasing. Gravity Coworking has tripled its Sydney footprint, while other operators such as Stone & Chalk and Tank Stream Labs have also grown.
The recent growth – and arrival of WeWork – is concentrating the sector in the hands of its top players. The biggest 14 – the second-largest of which is Blackwall Property Funds-owned WOTSO Workspace – collectively account for 81 per cent of all co-working space in Sydney.
