Sydney dominates Asia-Pacific office market amid 11% dip in 2024

Despite a minor 11% dip in demand growth compared to last year, Sydney remains a top player in the Asia Pacific flexible office market in 2024. Sydney has become the largest flexible office market in Australia, surpassing Melbourne, while the rest of the country is expected to see significant expansion, according to Green Street News.

However, data from The Instant Group reveals that Sydney's demand didn't grow as much as in other major Asia Pacific cities like Bengaluru and Hong Kong, which saw significant increases. Savills also reported a slight decrease in enquiries for coworking and flexible offices in Sydney.

Savills and Office Hub both reported that the continued popularity of hybrid work arrangements is keeping demand for flexible and short-term office options steady. The current economic uncertainty and changing interest rates are also making flexible office solutions more appealing to businesses looking for adaptable and cost-effective workspaces.

Sydney's flexible office market, encompassing coworking spaces and serviced offices, has demonstrated strong occupancy rates throughout 2024, hovering between 70% and 80%, according to data from Savills. This contrasts with the broader Sydney CBD office market, which has seen its vacancy rate rise to 12.8% due to a significant influx of new commercial real estate.

In 2024, the Sydney CBD witnessed the addition of 164,552 square meters of new office space, including notable developments such as Parkline Place, 333 Kent Street, and the over-station projects at Martin Place and 1 Elizabeth Street. While the national trend indicates an increase in CBD office vacancy rates in the latter half of 2024, Sydney's flexible office sector has maintained relatively high occupancy, signalling sustained demand for adaptable workspace solutions within the city.

Sydney CBD has seen an increase in the average cost of flexible office desks this year, especially in high-end areas such as Barangaroo. Meanwhile, The Instant Group has reported a growing interest in flexible office spaces in Sydney's suburban areas.

Despite these rising prices in the CBD, flexible office operators are using incentives like access to additional workspaces and rent-free periods to attract and keep tenants. Tenant CS also indicated that significant incentives are being offered in the traditional office market.

A noticeable difference is emerging between top-tier and more standard flexible office spaces. Newer, premium locations are commanding higher rental rates, while older workspaces are experiencing lower occupancy levels and charging less.
 

Sydney's office scene is shifting as businesses increasingly favour flexible workspaces like serviced and creative offices over traditional leases, as Office Hub stated in its “The Ultimate Guide to Serviced Offices in Sydney”.

Experts at Savills pointed out that the appeal of flexible office spaces lies in their adaptability and shorter lease agreements. In response, traditional landlords are now entering the flexible market. Savills and CBRE further highlight that these landlords are launching ready-to-use office suites with shorter contracts and shared facilities to meet the growing demand for more flexible options.
 

Many certified market experts predict that the demand for flexible office spaces in Sydney will remain steady. Desk rates are expected to stabilise, but a clearer distinction between high-quality and less desirable spaces will likely emerge.

Major infrastructure projects, such as the Sydney Metro expansion, are anticipated to positively influence the flexible office market by making more areas accessible.

The future outlook for Sydney’s flexible office market suggests continued evolution, with stable desk rates and more focus on workspace quality and location.