Why more and more businesses are shifting to more flexible and agile workspace solutions.
The past few years has seen a significant rise in the supply and demand of flexible office space which has been particularly heightened post Covid-19, as workforces have sought to cut costs and revaluate their working practises, office size requirement and adapt to hybrid working. Many companies have sought to downsize their traditional office space and shift to more flexible and agile workspace solutions.
The Sydney office market has been no exception, seeing expediential growth in the flexible office market, even prior to Covid-19. Flexible office spaces accounted for 7% of the total office market in Sydney in 2019, up from just 1% in 2013. Vacancy rates in the Sydney Office Market now sits at 11.32%, the highest since Q1, 2005. This decreased demand for traditional office space has been influenced by the shift towards flexible working.
This growth is predicted to continue for the next decade with 25% of all commercial landlords to have flexible office space in their portfolio by 2025 and flexible offices to make up a quarter of the total office market by 2030. With no sign of the expanding market slowing down and the increasing popularity of flexible offices with tenants, MMJ have researched what exactly are the advantages are for tenants and whether your business should consider exploring a flexible arrangement moving forward.
What is Flexible Workspace?
Flexible office space comes in a variety of forms and can include coworking spaces, private serviced offices, virtual offices, and other types of flexible workspace solutions. The flexible element comes into play whereby tenants can lease for a shorter period than a traditional office lease, ranging from a few hours to several years, and typically have access to a range of amenities, such as shared meeting rooms, kitchens, and breakout areas. The two most popular forms of flexible space in the Sydney office market are:
Private Serviced/Flexible Offices - allows small businesses to lease a private serviced office on flexible terms, typically ranging between 2-15 desks per office.
Coworking Space - allows individuals or small businesses to lease a single or multiple desks in a shared office space with other likeminded individuals/businesses.
The cost of renting flexible workspace, both coworking and private serviced offices, are fully inclusive of amenities and services such as Wi-Fi provision, IT solutions, cleaning and often reception services. Access to boardroom and meeting rooms for hire and printing credits are also available at small additional costs. Both flexible options are typically priced per desk and are fully inclusive of all rent, services and outgoings. For example, $700 per desk/person (per calendar month).
Private Serviced/Flexible Offices allow businesses to lease a private office space on flexible leasing terms, combining the advantages of privacy and flexible lease terms, whilst benefiting from the advantage of a Plug and Play solution. Private offices are fully fitted out with a bespoke number of desks/workstations. Serviced offices are therefore ideal for businesses that require a private, professional workspace that is fully equipped and managed, but have the flexibility to scale up or down as their business needs change.
Coworking Spaces alternatively have the same services and amenities on offer but are shared by multiple individuals or companies. They are designed to foster collaboration and networking among the tenants. Coworking spaces are ideal for freelancers, entrepreneurs, and small teams who are looking for a flexible workspace solution that offers community and networking opportunities.
What are the Advantages to Tenants?
There are several key advantages that flexible workspace can provide for tenants and businesses:
1. Cost Saving & Scalability
Flexible offices can be a cost-effective solution for businesses as they typically have lower upfront costs and are rented on a flexible basis, allowing businesses to scale up or down as needed, without the financial commitment of a long-term lease.
With the average price for Premium/Grade A offices in Sydney CBD $1,196 per sqm and $875 per sqm for secondary Grade B assets, businesses can achieve considerable savings by opting for a flexible office arrangement that allows them to reduce the number of workstations and space required, resulting in savings. Particularly with workforces implementing home working and reducing the number of office days, it a great opportunity for businesses to re-evaluate their size requirements and save costs, whilst having access to premium amenities.
For example, a company looking for a Sydney CBD office for 15 staff members may require a 150 sq m office (based on 10 sq m per person, a requirement of the Building Code of Australia). At $1,196 per sqm Gross for a Premium/Grade A asset this would result in $179,400 per annum + GST and Outgoings (utilities, cleaning etc.) and they will typically be locked in for at least a 3 year lease term. In contrast, a business may lease a private flexible office at $800 per desk (per calendar month) for 15 staff, resulting in $144,000 per annum + GST (inclusive of all outgoings), on a 6-24 month basis with the ability to scale up or down in size.
2. Premium Amenities & Convenience
Flexible workspaces offer premium onsite amenities and aesthetically pleasing fitouts which are fully furnished and fully serviced, providing a simple and convenient solution for businesses to provide an attractive and positive work environment, which is pivotal to bringing staff back into the office. In the Sydney office market, there is a clear trend to Flight to Quality, whereby we are seeing strong demand for Premium and Grade A assets that provide a luxurious work environment for businesses and their workforces.
Flexible workspaces can meet this demand by offering premium fit outs, luxury hotel-like amenities and services such as end of trip facilities, members lounge areas and top of the range IT Infrastructure. They are also highly convenient by offering a Plug and Play solution, whereby tenants can walk in and instantly work as there is no delay in needing to furnish and set up essential services such as Wi-Fi provision. With 80% of tenants in the Sydney office market seeking fitted out space, it is clear why convenience is a strong advantage of flexible workspace solutions.
3. Prime Locations
A further convenience advantage is location, often flexible workspace arrangements hold prime positions in CBDs and key business areas. Businesses and individuals can therefore take advantage of a holding premium address that are typically expensive to access, without the large costs. With this comes advantages of transport links, business status, networking opportunities and a wide range of shops, services and amenities on their office doorstep.
4. Increased Productivity
Flexible workspace environments are designed to provide a comfortable and aesthetically pleasing work environment. They offer amenities and services that can help to improve productivity, such as high-speed internet, advanced technology, meeting rooms, and administrative support.
This can help to reduce stress and create a positive work environment, which can enhance productivity and creativity. As mentioned, there is also a key market shift that business are looking to lease quality spaces that can attract their workforces back into the office and increase productivity.
5. Networking Opportunities
Flexible workspace solutions offer a high level of connectivity with other like-minded individuals and businesses. Both coworking and private serviced offices with communal lounge areas, are designed to be collaborative and community-focused, allowing tenants to network and potentially form partnerships or collaborations. Working in a collaborative and innovative environment can spark creativity and inspiration, which can lead to new ideas and solutions for businesses.
Flexible workspaces also often host events and activities, such as workshops, seminars, and networking events, which allow tenants to meet and connect with other like-minded individuals and businesses.
Summary
Flexible office spaces are becoming increasingly popular and competing with traditional offices spaces. The market has big growth forecasted over the next decade, as more and more tenants and business are becoming aware of the advantages.
The key advantage of flexible workspace arrangements for tenants and businesses is primarily that they offer greater flexibility by offering short to medium term solutions, ability to scale up and down and cost-effectiveness. The flexible workspace model is particularly useful for start-ups, smaller firms looking to grow and businesses looking to revaluate/downsize whilst their workforce adapt to hybrid working.
Cost saving, scalability and agility are therefore the greatest advantage of flexible workspace to tenants and businesses. To summarise if you are a tenant in the Sydney office market looking to relocate premises and considering flexible workspace solutions, the key advantages you can benefit from are:
Potential Cost Saving & Scalability
Premium Amenities & Convenience
Prime Locations
Increased Productivity
Networking Opportunities
MMJ Sydney are responding to the market demand for flexible workspace. We have worked with a number of landlords to establish premium flexible workspace environments and now have over 20 prime locations offering flexible workspace, both coworking and private serviced/flexible offices, across the Sydney CBD, Fringe, North Sydney CBD and the Greater Sydney area, including Chatswood and Parramatta. Unlike other providers our price per desk rates are fully inclusive and have no hidden costs, maximising your savings.
If you are interested in finding out more or want to experience one of the many benefits flexible offices can provide, get in touch today with one of our leasing experts who can provide a full overview of the market and provide your business with a shortlist of options to meet your exact needs. Alternatively, please see our listings page to see available opportunities for your next big move.
