Flexible Office Market on Track for Expansion in Australia

Australia’s flexible office market is showing early signs of recovery as local and offshore operators grow their footprint and occupiers target higher flex space usage.

This is highlighted in CBRE’s new Australian Flex Space in the Age of Hybrid Work report, which points to a more positive outlook for the sector following a slower than expected post-pandemic return to the office and a degree of consolidation in the flex market.

CBRE’s data highlights that Australia’s flexible office market footprint increased by 2.1% in the major east coast markets in the 12 months to June 2023. Total penetration of flex operators in these markets currently represents 2.7% of office stock, down from 3.1% at the sector’s peak in early 2020.

In turn, CBRE’s 2023 Occupier Survey shows that while approximately 70% of the Australian-based respondents currently have no exposure, or less than 10% exposure, to flex space this number is expected to reduce to just 41% in three years-time, indicating a further push into the sector by occupiers.

CBRE’s Australian Head of Office Research Tom Broderick noted, “Office landlords are strategically embracing the evolving working dynamics by exploring innovative solutions such as flexible office spaces and third spaces within their buildings. This shift is driven by the changing preferences of tenants and the recognition that providing adaptable and versatile work environments can enhance tenant satisfaction, attract new occupants, and ultimately add value to their properties.”

CBRE’s report highlights that most new Australian office developments are expected to incorporate some level of flex space, with larger corporates often requiring it.

However, while the flex market in Australia is expected to grow in the medium-term, operators have needed to readjust post-pandemic.

CBRE’s Asia Pacific Head of Flexible Real Estate Sidharth Dhawan said, “Evolving workplace dynamics have triggered the need for flexible space operators to rethink their offerings to remain relevant and appealing in a post-pandemic world. These offerings vary by tenure and customisation, ranging from “gym pass” like day memberships on the one end, through to fully turnkey managed spaces on the other. International operators now see Australia as a mature flex market offering growth potential and some are actively looking at opportunities, particularly in prime grade buildings.”

Other key takeouts from the report include:

• There has been a clear divergence between the growth/contraction trajectory of Australia’s east coast flex markets, with Brisbane now growing significantly after a period of consolidation; Melbourne observing the greatest degree of contraction and Sydney sitting somewhere in between while having Australia’s highest flex penetration at 3.2%.
• The higher proportion of technology and start-up type tenants is one of the key reasons why Sydney can sustain a larger proportion of flex tenants.
• Offshore operators make up over 50% of the flex footprint on Australia’s east coast following local operator consolidation.
• Over the past three years, the average flex centre size has grown by 30% to average 2,300sqm.
  
  

To read the full report click here.