Sydney's creative industry pays higher per person rent than finance: Savills' Yolande Barnes

GUEST OBSERVER

There is a big difference in most world cities between rents paid by a creative or digital scale-up and a hedge fund, although the gap is closing. In June 2015 the total annual office rent paid for each member of staff in a hedge fund averaged $22,399 across the 12 world cities covered in this report. This compares to $10,453 per person for a small digital scale-up or creative company, which represents just 47% of the financial sector office rent. This ‘digital discount’ has eroded since 2008. At the end of 2008 the digital and creative industry paid, on average, 42% of what a hedge fund would pay in rent.

The difference between these rents clearly reflects a different scale of revenue between a financial company and a creative company, but we expect the gap to continue to close. This is because the size of the digital and creative sector is growing faster than the finance industry in many of the world cities we monitor, meaning rental growth is higher too.

Meanwhile, it takes time for the nature and location of office stock to change from the type of large, floor-plate corporate premises required for banking to smaller, flexible and altogether more dynamic spaces required by creative and digital occupiers. This means that scarcity value also increases rents.

In some cities the importance of the digital and creative industry would already seem to have overtaken finance. In Sydney, for example, creative industry companies are paying more per person for office rents than finance companies are. Local supply and demand factors will clearly have an impact here. Relatively low demand for financial offices in Sydney means the city has some of the cheapest rents for this sector among our world cities, paying well below the world average per person.

Globally, the average growth of office rents we monitor among our 12 cities was just 1.7% between December 2008 and June 2015. But this average disguises a big difference between the financial sector and creative and digital sector. While office rents in the financial sector fell by an average of 1.8%, the creative sector offices saw growth of 8.6% over the same period. 

Yolande Barnes is director, Savills World Research Team and can be contacted here.