The office market in Sydney is showing no signs of slowing down with big business driving an increased demand for workspaces in the New South Wales capital.
According to Colliers International, Sydney recorded a 32 per cent increase for 3000sqm workspaces from the fourth quarter of 2017 to the first quarter of 2018, representing a 63 per cent increase on Q1 2017.
Cameron Williams, Colliers International national director of office leasing, says the demand is driven by businesses needing to plan their workspaces years in advance.
"With the next supply cycle only three years out, we're seeing larger tenants enter the market and plan ahead to make themselves available for the projects that will become available," says Williams.
"Essentially, the supply cycle is stimulating demand as these tenants are being actively pursued."
Williams says that the market a year ago was still recovering from the displacement of small tenants. Now that this process has stabilised, Colliers is seeing enquiries from smaller tenants being driven by both lease expiries and growth.
"We expect, many of these larger tenants will be approached by big backfills and major developments available in the market from 2020; and in a lot of cases that is the catalyst for them to put themselves in the market now in a formal sense."
Also driving the demand is an increased rate of merger and acquisition activity, particularly within the legal and finance sectors.
"We have seem many groups buying into partnerships and mergers between different groups particularly the mid-sized law firms, which has triggered demand for workspace in these sectors."
Given the tight market conditions, Colliers International head of tenant advisory Simon Crouch says big businesses are having to plan much further ahead than they would in other markets.
"Many big companies are planning ahead to ensure they have a large number of opportunities to consider for their future office space," says Crouch.
"We advise occupiers looking for space 5,000sqm or greater to commence their accommodation search at least two to three years in advance of their lease expiry to enable sufficient time to consider the upcoming opportunities."
Nationally, office demand was up by 27 per cent from Q4 2017 to Q1 2018.
Crouch says co-working space operators are most active in their search for large office space this year.
Companies like WeWork have committed to York and George and HCF House at 403 George, as well as two other sites in the Sydney CBD. Jobs NSW also recently grabbed more than 17,000sqm at 11-17 York Street for the Sydney Startup Hub.
"We're now seeing enquiries for co-working spaces ranging between 2000sqm to 5000swm and upwards," says Crouch.
"We're also seeing an ongoing trend for organisations with a high level of professional sales teams moving into the CBD including medical and pharmaceutical companies who had typically always been suburban tenants."
"These tenants are moving into the CBD so they can reposition their business and attract and retain the best talent."
Business News Australia
Get our daily business news
Sign up to our free email news updates.