Australian startups and other tech companies are returning to the centre of major cities in droves as office trends shift away from Silicon Valley-style campuses, according to a new report form global real estate firm Cushman & Wakefield.
There has been a significant increase in the number of tech companies securing leases in the Sydney CBD, with at least 40 small and larger companies taking over premises in the last year.
The report found that technology sector is fast becoming the key driver of demand for CBD office space, and is expected to hit more than three times that of the finance and insurance sectors over the next five years.
Finding affordable real estate in a suitable location is a key issue plaguing the Australian tech sector, and a primary factor in holding back its growth. A number of recent initiatives have aimed to address this, most notably the newly-unveiled NSW government’s $35 million Sydney Startup Hub in the CBD.
While the emphasis had previously been on building campus-style offices, startups and bigger tech firms are now returning to the CBD, according to former Fishburners CEO Murray Hurps.
“I think visibility is the most underrated factor when locating startup environments. There are incredible things happening in Australia and hiding these away in a campus is missing a huge opportunity to inspire others and attract support,” Mr Hurps told InnovationAus.com.
Mr Hurps, who oversaw Fishburners’ planned move from its current site at city-fringe Ultimo into the new Sydney Startup Hub in heart of the CBD, said an inner city location has a number of benefits for tech companies.
“The most important aspect for startups in choosing a location were the ability to attract talent, the perception of their company, convenience for visitors, neighbourhood feel, safety and proximity to other startups,” he said.
“CBD locations may be a little more expensive than some other options, but for most companies it ticks all of these boxes as well.”
The move back to the CBD in Sydney has been led by tech titans like Apple, Dropbox and LinkedIn, all of which have taken office space in Martin Place. But the migration of tech companies has been much wider than just these big players, the report said.
“Large tech firms taking up premium grade space around Martin Place have captured headlines, but demand for CBD space by tech companies has been much more widespread with around 40 leases signed over the past 12 months in all CBD precincts,” report author John Sears said.
“Demand for CBD spaces from tech tenants has been driven by a desire for a work environment that will help attract and retain talent.”
The largest of these 40 leases was unsurprisingly the Sydney Startup Hub, which signed onto a 17,000 sqm lease across 11 levels at Wynyard Green.
The city’s tech companies have previously tried to establish precincts at campuses like at Macquarie Park, but as the report found, the move to cloud computing, tech advances in a number of industries and a desire to attract talent with a work environment have driven them back to the city.
“Software applications are now usually supplied over the web rather than on disks, and with people the major assets of tech firms, management are keen to establish a work environment to attract and retain the best talent,” Mr Sears said.
Hopes that a tech precinct could be established outside of the Sydney CBD also hit a roadblock at the end of 2015 when the tender to develop the Australian Technology Park was awarded to the Commonwealth Bank over Aussie tech darlings Atlassian.
The NSW government did however put a requirement down that 75,000 sqm of the space be allocated to tech, and the first use of this space has been announced recently, with York Butter Factory to establish its Sydney presence at the fringe site.
The trend of startups and larger tech firms opting for the CBD has also been seen in Victoria, with overseas tech firms like Slack and Zendesk establishing city offices, along with a string of smaller companies.
Sydney fintech hub Stone & Chalk recently announced its long-awaited launch into Melbourne, with it initially sharing an office with agritech accelerator SproutX in the city before looking for a larger base.
The Victorian government is currently seeking tenders for a FinTech hub in Docklands, while Queensland is offering free working space as part of its HotDesQ program