Recent trends in the Sydney sublease market

The Sublease market in Sydney CBD has made a steep decline in recent years, according to recent articles by Property Observer and Australian Financial Review.

Subleasing is becoming less attractive as Subleased space must compete in a market with considerable vacancies. Many of these direct new Leases can come with a fit out and with high incentives available to Tenants.

Kelly Hovorka, TRS Director Transaction Management, points to a trend that Sublease space is increasingly being advertised as a direct Lease. “Although Subleasing may be an option, Landlords will generally accept a direct new Lease, this was not so common a few years ago”. 

Subleasing is becoming less attractive as Subleased space must compete in a market with considerable vacancies. Many of these direct new Leases can come with a fit out and with high incentives available to Tenants.

Office space available for Sublease usually comes as a result of unforseen changes for a business resulting in breaking the Lease early, whether it due to downsizing or other efficiency needs. Kelly stated that there is less of this now due to conscious ‘right-sizing’ of businesses in the last few years. Due to the GFC and decreased business confidence, businesses were very conscious of the size of their Leased space, and were sure to “right size” their businesses during their last Lease renewal, finding room with space efficient fit-outs. These efficiencies have meant there is less surplus space down the track.

Alex Johnson, Director Business Development at TRS, added “The GFC was responsible for a spike in Sublease space, with 100,000 square metres on the market at the commencement of 2009. Since then, it has been slowly declining as business confidence improves. At the end of 2014 there was a mere 37,858 square metres of Subleased space on the market. Furthermore, four of the new Sublease listings occurred because of strategic growth, as tenants outgrew space or moved to superior premises.”

The amount of Subleased space has also fallen in the other east coast cities Melbourne and Brisbane, however it appears to be on the rise in Perth, Canberra and Adelaide. The cities that have seen an increase in Sublease space are more affected by the mining and industrial markets, whereas Sydney and Melbourne are reliant on corporate business sectors such as legal, IT and finance.

TRS stands independent from property companies, agents and Landlords in market search and Lease negotiations, ask us today how we can help you with your lease.

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