Is the Conventional Office Lease Model Dead?

It’s the question that should be on every commercial real estate agent’s lips: Is the conventional Office lease model dead?

In its current form, the short answer is yes. But it’s not all doom and gloom. In fact, Colliers’ recent CBD Office Market Report revealed that the demand for office space far exceeds supply in all major Australian centres, and Sydney and Melbourne have both experienced double-digit price growth.

The report predicts that rental prices will continue to rise, vacancy rates will continue to fall, and landlords will favour long-term office leases to future proof their assets.

While the commercial property outlook looks positive on paper, the reality is that the number of co-working spaces and serviced office desks available for lease in Australia’s cities will double by 2021, which will dramatically unsettle the conventional CBD equilibrium.

If supply suddenly exceeds demand due to increased competition, vacancy rates will skyrocket, which will result in a fall in prices – not just in the shared office marketplace, but across the entire conventional platform.