Melbourne’s CBD is now the co-working capital of Australia, and the market looks set to support continued uptake and demand.
In 2016, co-working tenants accounted for 11,340 square meters of net absorption out of a total 188,600 square meters in the CBD – the highest level of overall net absorption since 1978, according to figures from JLL.
“In the past couple of years, Melbourne’s office market has become more and more popular with start-ups which has really driven the demand for co-working space,” says Stuart Colquhoun, JLL’s Head of Office Leasing in Victoria. “This demand has also had an impact on net absorption levels, as co-working providers seek bigger spaces.”
And while there’s much talk about the uptake of co-working space across the country, particularly in Sydney – the country’s biggest city – the figures support Melbourne’s position as the co-working capital; Sydney’s 5,340 square meters of net absorption recorded in 2016 was significantly lower than Melbourne’s 11,340.
So just what is it about co-working spaces that is attracting tenants? There’s three key reasons, according to Colquhoun. “The practice gives companies freedom to manage space requirements as headcount grows; it also enables them to position their business as innovative and collaborative – which can help attract and retain staff; and, importantly, it provides a diverse working environment for staff.”
“We see a number of co-working providers now active in Melbourne’s CBD, including Space & Co and Team Square. Major global players WeWork and RocketSpace, as well as more local HUB Melbourne and Compass Offices will enter the market later this year providing choice and options for an increasing pool of tenants,” he explains.
Annabel McFarlane, JLL’s Strategic Research Director, agreed. “We estimate there are 23 co-working operators currently in Melbourne, spread across 60 locations. 82% of these are within the CBD or Docklands, and there are four more expected to open this year. Majority of these did not exist before 2012 and many have opened multiple locations in this time,” she said.
Looking beyond start-ups
While recent research indicates that 72.5 percent of start-ups will use the coworking business model, it’s also being embraced by large companies to improve collaboration, innovation, flexibility as well as talent attraction and retention – particularly in the legal and professional services sector.
“We’re now starting to see some providers cater for specific sectors. For example, RocketSpace focuses on the IT sector while Clarence caters for the legal sector. This model is doing even more to attract and connect similar minded individuals and organisations.”
“A broader pool of tenants using co-working space is actually beneficial for landlords, providing certainty around lease terms and rent,” says Colquhoun. “Many landlords are looking at strategic ways to reconfigure their space to attract and retain these types of tenants now and in the future.”