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Suburban centres and satellite office locations on the rise

Workers who have become comfortable working from home are leading businesses to adopt more flexible working arrangements on a permanent basis according to experts.

As CBD office occupancy rates continue to increase, there has also been a rise in businesses looking to offer their workforce a “hub and spoke” model, with satellite offices and more offices closer to suburban CBDs.

Ray White Commercial Head of Research Vanessa Rader said there were signs this model was coming to fruition with suburban cities such as Parramatta in Sydney’s west recording growing interest.

“Parramatta as a CBD is home to close to one million square metres of quality office space, soon to overtake other Sydney suburban markets such as Macquarie Park and North Sydney, with recent completions setting new benchmarks to quality for this suburban CBD office market,” Ms Rader said.

“While vacancy is expected to extend to as much as 15 per cent in the next round of vacancy counts, after dropping to sub 3 per cent in 2019, the future still looks bright for Parramatta.” 

Ms Rader said the level of inquiry continues to increase in locations outside the major CBDs.

“Enquiry levels have grown as businesses look for satellite office locations within easy commutable distance for their staff and Sydney’s west has been identified as a prime location,” she said.

“While inquiry is up, incentives continue to play a role to secure tenants to this location, growing to as much as 40 per cent, which subsides a speculative fitout, making a move a cost neutral exercise for most businesses.”

Ms Rader said the rise in popularity of the hub and spokes model was likely to continue.

“While expansion will see a more rapid take up of stock in our CBDs and spoke markets such as Parramatta, we are seeing businesses opting to commit to adequate space without the usual 10-15 per cent expansion space, with businesses foreseeing the hybrid working model is here to stay,” she said.

“We expect to see additional “spokes” added to the model by way of office locations in other regions such as Liverpool and Penrith again catering to the location of staff, transport, connectivity and quality accommodation offerings available.”

Ms Rader said this “new normal” for office workers was growing across the country.

“This is not just a Sydney phenomenon as markets such as Brisbane fringe, Gold Coast and West Perth also have recorded growing inquiry, capitalising on an easy commute for staff, and affordable, yet attractive accommodation options,” she said.

“This is an interesting time for both the CBD and suburban office markets, which continue to attract strong institutional and overseas investment keeping yields at historic lows despite vacancy levels tipped to remain high over the medium term.”

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.