A wave of new businesses in the technology sector has seen a decrease in Sydney and Melbourne office vacancy rates for the first time in at least a year, according to new research.
Companies including LinkedIn, Facebook, Amazon and Wotif are the new players in the business districts, leasing office space vacated by the shifting of the financial industries towards the fringe areas of Barangaroo and Docklands, Melbourne.
Leasing agents said the staff for the new technology companies were engineers and finance graduates who liked a creative space in the traditional core of a city.
In New York, LinkedIn’s offices are in the Empire State Building, while several similar companies are moving out of Silicon Valley into downtown Los Angeles. In Sydney, LinkedIn rents space at No. 1 Martin Place, while Google is in the market for more than 10,000 square metres of new lodgings.
Jones Lang LaSalle's director of research Andrew Ballantyne said the demand from these companies has helped to push Sydney’s office vacancy rates under double digits at 9.9 per cent, while some new space saw Melbourne move to 11.1 per cent, but sub-let space, the smaller areas traditionally harder to lease, was down, according to JLL’s second quarter, 2014 data.
‘‘The types of employees the tech companies want to attract are highly skilled maths graduates, such as engineers, but they must offer City addresses to snare them from traditional investment banks and stockbroking analysis, which also requires a high degree of maths expertise,’’ Mr Ballantyne said.
‘‘A recent JLL survey showed that the technology sector respondents reveal that technology companies are among the most aggressive in pursuing growth opportunities and expanding their footprint in emerging markets.’’
The conversion of older offices into apartments, mainly in the bigger cities, was also positive for office vacancy rates.
But in the rest of the country, office markets are hurting as the mining sector winds down.
The data showed the national vacancy average was 12.2 per cent, thanks to higher rates in Brisbane and Perth.
JLL’s head of office leasing, NSW & Australia, Tim O’Connor said in the current environment - of new buildings - the CBD value proposition provides an opportunity for occupiers looking to centralise their operations and leverage off the amenity of the CBD to be more attractive to prospective job applicants.
“Over the next three years, a significant amount of office stock will be withdrawn across CBD office markets. Almost 5 per cent of office stock could potentially be withdrawn between 2014 and 2017,’’ he said.
‘‘Those assets with residential conversion potential will see the displacement of tenants and generate new enquiry in the leasing markets.”
