- Prices remained unchanged at $650 per desk.
- Perth and Adelaide also unchanged, while Melbourne underperformed.
- Brisbane CBD prices rose 4% to $702 per desk.
Rubberdesk’s second quarterly Flexible Office Space Report has found that office rates in Australia have not changed in Q2 2023, standing at $650 per desk, surpassing expectations considering the ongoing economic volatility.
Nevertheless, a 6% injection in supply coupled with new offices entering the market in late 2023 is expected to exert downward pressure on prices.
Available flex space is now close to an all-time high, with the vacant space rising by 5.7% to 179,745 square metres since the last quarter.
Demand dwindled in Q2 after the year’s solid start, partly driven by companies with leases deciding to stay put or downsizing to smaller spaces, a trend that has persevered over the past three quarters.
Coworking spaces facing challenges as businesses flock to high-quality buildings
Giving his thoughts on the changing market dynamics, Jim Groves, co-founder of Rubberdesk, says “Coworking spaces have faced stiff competition recently due to the rising number of office vacancies in CBD areas and the attractive incentives offered for leased fitted spaces.”
“Tenants now have a greater variety of options and less urgency to commit, resulting in a market where premium and vibrant office spaces with excellent features can be found on flexible terms.”
Having survived the worst parts of the COVID-19 pandemic, businesses have realised that having a high-quality workplace is crucial in improving worker satisfaction and productivity. Hence, more companies are flocking towards grade-A office spaces, leaving older buildings to rust.
While the rates have held nationally, the results were not consistent across the capital cities.
Sydney going strong in Q2
Desk rates in Sydney grew by 2% to $980 in Q2, with a 13% quarter-on-quarter jump in available flexible office space. Industry leaders including The Executive Centre, The Great Room by Industrious, and Hub Australia are partly responsible for the growth, having increased their presence in Sydney.
Although new inventory in the market spiked by 30% since the start of 2023, it is uncertain if prices will soften, as premium spaces continue to support current prices.
Prices outside the Sydney CBD were mostly unmoved, except for Parramatta, which rose 8% to $825 per desk. On the other hand, prices in Manly fell by 12.5% to $700 per desk.
Melbourne CBD affected by vacancies and hybrid working
In Victoria, Melbourne’s Central Business District (CBD) experienced a 1% drop in the cost of office space to $695 per desk per month.
This decrease was attributed to the persistent pressure caused by vacancy rates across the Melbourne CBD and the popularity of hybrid working arrangements, resulting in low demand for all office types compared to other markets. Businesses are instead electing to stay or downsize.
Areas outside the Melbourne CBD fared much worse, with South Melbourne, Collingwood, Docklands and Southbank posting significant price reductions from 5% to 12%, quarter-on-quarter. Having dropped by 10% over the quarter, Docklands is the most affordable area for flexible office spaces, coming in at $515 per desk.
Brisbane flexible office market soaring
Desk rates in the Brisbane CBD saw a 4% price increase, jumping to a record $702 per desk per month. This change is attributed to a tight market, with little change expected over the coming years due to a scarcity of new offices coming to the market.
Rates outside of the Brisbane CBD fluctuated, with prices in Bowen Hills and Fortitude Valley dropping 2 to 4%, or $547 and $527 per desk respectively. Prices in South Brisbane and Milton stayed the same.
Perth and Adelaide hold steady
Perth desk rates have remained unchanged at $700 per desk for the second quarter in a row. Here, the commercial real estate market remains tight, and new supply is constrained.
While prices outside of Perth’s CBD are much more affordable, they account for a mere 25% of available office space, giving companies little choice when searching for serviced offices fully equipped with amenities.
The situation is more or less the same in Adelaide, where flexible office spaces are short in supply.
As demand continues to surpass supply, desk rates have climbed for a fifth consecutive quarter, up by 1% from Q1 to $650 per desk. 89% of the offices are situated in Adelaide’s CBD, although there are options in Eastwood, Seaton, Mawson Lakes, and Prospect.
Canberra returns to form
After several quarters of price swings, desk rates in greater Canberra have reverted to their long-term rate of $500 per desk per month.
Desks in Canberra’s CBD go for $600 per desk, while areas in the suburbs are less costly, with the median going rate of regions like Symonston, Phillip and Dickson being $400 per desk.
