Knight Frank has launched a new report focusing on 'spec suites', following the firm's latest focus on providing advice to owners considering undertaking speculative suites.

The Suite Spot report will be an inaugural national report for speculative and pre-speculative fitted office suites. 

Spec suites are becoming increasingly popular among small-to-medium business as they're modern, fresh, and feature all of the latest amenities with a flexible lease, according to Jamie Nason, Director, Office Leasing, QLD.

“We originally saw the spec suite trend emerge in Brisbane as high vacancy levels meant landlords had to try different things to attract tenants. So they started fitting out their space with polished concrete floors, exposed services, funky furniture, and lighting to stand out from the crowd. The fitted-out space appealed to tenants as they were able to take on a flexible lease without needing to spend a considerable amount of money on fitting out the space," Mr Nason said.

“Nationally, Brisbane continues to be the largest market for spec suites, with approximately 27,000 square metres currently available compared to Sydney’s 9,300 sqm and Melbourne’s circa 5,000 sqm.”

David Howson, Partner, Head of Office Leasing, Australia says that while the trend emerged in Brisbane, it's since taken off across the nation.

“While the trend started predominantly in B-grade office space within Brisbane, we are now seeing landlords undertake speculative refurbishments in all asset grades (premium to C-grade) across the country," Mr Howson told WILLIAMS MEDIA.

“Spec suites typically vary from 60 to 1,000 sqm. However, our clients are having the most success with space ranging from 150 to 250 sqm, as it suits start-ups that may have outgrown co-working but are not yet at the stage where they are willing to take on significant amounts of space and the cost that can be associated with converting the space.”

Mr Nason says the Suite Spot report found that landlords that have undertaken speculative refurbishments in their buildings are outperforming their competitors as a result, with spec suites remaining on the market for less time.

“The turn-key solutions allow businesses to transition smoothly into a new office space, without having to worry about project managing a fit out and the associated downtime involved," Mr Nason said.

Brisbane

The report found 27,000 sqm of spec suites available in the Brisbane market, and despite the current oversupply, tenant demand remains as solid as it's ever been.

Pictured: A fitted out spec suite. Image supplied.

“Spec suites in Brisbane range from 60 to 916 sqm and are found in all grades of buildings (premium to C-Grade), with the majority of those currently available in B-Grade assets. The rents we are seeing reflect the range of space available, starting at an average gross rent of $515 per sqm pa for C-Grade and rising to $855 per sqm pa for premium.

“There is a positive sentiment in the market as tenants are choosing to relocate their businesses to new spec suites, with landlords that have refurbished their buildings outperforming their competitors," Mr Nason said.

Sydney

The report found 9,300 sqm of spec suite space available in Sydney's CBD B-grade market.

According to Knight Frank’s Seann Cash, Associate Director, Office Leasing, NSW there has been an increase of spec suite space becoming available in A-grade buildings following the new builds at Australia Square and the MLC.

Pictured: A spec suite inside the MLC building. Image supplied.

“The increase in spec suites has led to a convergence of asking rents between the Premium and A-grade markets. The average gross rent for premium spec suites is currently $1,506 per sqm per annum (pa) compared to $1,465 per sqm pa for A-grade space and $1,055 per sqm pa for B-Grade spec suites," Mr Cash said.

Banking, finance, and insurance are the dominant spec suite tenant, collectively accounting for 42 per cent of the New South Wales market.

Melbourne

Daniel Street, Knight Frank’s Executive, Office Leasing, VIC says the Melbourne leasing landscape has changed dramatically over the past few years.

“There has been a generational shift in the way people are looking to work, resulting in a rise in demand for smaller suites. In the past four years alone we have recorded four times the amount of inquiries for office space ranging from 100 to 500 sqm," Mr Street said.

Pictured: A spec suite inside Melbourne Central Tower. Image supplied. 

Knight Frank’s Ashleigh Hodgson, Executive, Office Leasing, VIC added, “There is over 5,000 sqm of spec suites available in the Melbourne CBD, with average gross rents starting at $716 per sqm pa for B-grade increasing to $821 per sqm pa and $823 per sqm pa for A-grade and premium respectively.

“Our evidence has confirmed that buildings with spec suite space on offer remain on the market for less time, significantly reducing the downtime of whole floor vacancies by up to nine months.”

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