Tech sector staff cuts hit sublease office space

Redundancies across the tech sector and a preference to work remotely has led to lower demand for office space as companies look to reassess what they need in the longer term.

In the CBRE’s latest Sublease Barometer it shows the volume of national sublease space has risen by 3 per cent this year, to reach 255,000 square metres, with the information, media & technology (IMT) sector being the primary driver of the overall 7,000 square metre increase.

While the overall level remains 40 per cent below the early 2021 peak, the surge in demand by the tech industry for space is coming off in the Melbourne and Sydney central business districts. However, the smaller CBDs, led by Brisbane, are proving to be more resilient.

Tech staff lay-offs are impacting sub let space in capital citiesCredit: Louie Douvis

Sublease space usually comprises extra office floors a tenant has earmarked to lease in times of expansion. If the space is not needed, it can be sublet.

Having expanded rapidly over recent years, the global tech giants of Twitter, Meta, Amazon and Snapchat, among others, have all reduced or in some cases vacated all left space across Australian capital cities. But in Sydney, TikTok has taken a lease on levels 18-21 of the new Salesforce tower in George Street, equal to 4,800 square metres.

In the past two years with the global pandemic, it has been the financial and insurance institutions that have led the charge in handing back office space as people were forced to work from home. But demand is inching up as hybrid work practices mean more people are back in the office for at least three days a week.

CBRE’s Pacific head of office leasing Mark Curtain said the major capital cities of Sydney and Melbourne are more exposed to the financial and tech sectors, which have been experiencing cost containment pressures in the current environment.

“These markets are more exposed to the financial and tech sectors, which have been experiencing cost containment pressures in the current environment,” Curtain said.

“Australia’s smaller CBD markets have meanwhile recorded higher physical occupancy levels throughout 2022, which has put less pressure on tenants to offload space.”

He said Melbourne’s CBD has recorded the largest increase in sublease availability this year to 122,000 square metres representing 2.4 per cent of the city’s total office stock, up from 2.2 per cent a year ago but still well below the 4 per cent peak in late 2020.

The finance sector accounts for the most sublease space in Melbourne, totaling 42,000 square metres.

The Sydney CBD currently has 104,000 square metres of sublease space available or about 2 per cent of the city’s office stock, well down on the late 2020 peak of 171,000 square metres, which was 3.4 per cent of total stock.

This has increased in the latest survey by 1,400 square metres with the finance and technology sectors having the most stock on the market. However, according to CI Australia, the most recent deal has seen TPG Telecom (Vodafone) lease 9,360 square-metre of the former Westpac office space on levels 24-27 of International Tower 2 in Barangaroo.

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