Sydney Coworking Insight

Introduction

The Coworking Evolution 

Since the first coworking space was founded by Brad Neuberg in 2005 in San Francisco in the US, the coworking movement has become a global phenomenon over the last decade. According to reports by Deskmag, there will be more than 10,000 coworking spaces worldwide by the end of 2016 with 735,000 members. The number of coworking locations globally is expected to increase by 25% in 2017 to 12,700 with the number of “coworkers” surpassing one million. In 2016, coworking space operators have raised almost USD1 billion with WeWork being the industry champion, raising USD800 million for their global expansion. 

Australia was one of the earlier adopters of the coworking movement outside of the US, with coworking spaces opening in the country as early as 2006. Coworking spaces have since mushroomed across all Australian states and territories with the services oriented states of New South Wales and Victoria being at the forefront of this evolution. As such, the two state capital cities of Sydney and Melbourne are now homes to very vibrant coworking communities in Australia. 

The rapid expansion of shared work spaces across Australia has been underpinned by a number of factors. Whilst the changing nature of work, advancement in technology, the rise of a sharing economy and changes in workforce demographics are the key catalysts driving coworking nationally, accessibility to corporate headquarters, the emergence of a strong Fintech sector and a cohesive startup ecosystem are the primary drivers behind Sydney’s coworking evolution. 

Sydney is home to 12 of the top 25 ASX -listed companies and 30 of the top 50, according to Knight Frank Research. In addition, many of the global Fortune 500 companies have their regional or national head-offices in Sydney including technology giants, such as; Apple, IBM, Amazon, Microsoft, Google, HP and Samsung.

Moreover, Sydney has the largest startup ecosystem in Australia, ranking 16th globally and first nationally according to the 2015 Global Startup Ecosystem Ranking. More than 60% of Australian start-ups are based in Sydney, according to PWC’s latest statistics. This ecosystem is further enhanced by the availability of a deep talent pool, with 37% of Australian IT professionals (160,000 people) residing in Sydney. 

The Sydney Coworking Industry

The coworking industry in Sydney has evolved rapidly over the past decade. From just a handful of collaborative workspaces ten years ago, there are now 56 coworking spaces (excluding serviced and subleased offices) in Sydney across three primary submarkets; the CBD, City Fringe and Suburban (Figure 2).

The area of coworking space across Metropolitan Sydney has grown from around 1,400m2 in 2006 to 44,182m2 as at October 2016. This represents a compound annual growth rate (CAGR) of 41% over the past decade. By the end of 2017, the total coworking space is expected to reach 55,332m2, almost half of which will be located in the CBD.

Whilst the amount of coworking space in Sydney is currently less than Melbourne (58,880m2), Sydney tends to have larger  spaces than Melbourne. As at October 2016, the average size of coworking spaces in Sydney is 789m2, more than double that of 385m2 in Melbourne. Given relatively higher office rents and operating costs in Sydney, achieving economies of scale is critical for coworking space operators in Sydney. 

Sydney’s coworking market is dominated by large-size coworking hubs (1,000m2+). Almost three quarters of the total coworking space in Sydney (32,600m2) was provided by 15 coworking hubs of above 1,000m2 each (Figure 3). As at October 2016, there is one space of over 5,000m2, which is the new WeWork space at Pyrmont offering 8,000m2 – the largest coworking hub nationally. In fact, there is more space at WeWork Pyrmont alone than all 35 coworking spaces in the sub-500m2 bracket combined (6,910m2). There are six coworking sites between 500m2 —1,000m2  with a total of 4,680m2

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