Why AI firms are redefining the value of office space and why flexibility is a premium worth paying for

The reasons businesses choose flexible workspace have always been practical, and they have evolved with each decade. Pre-Covid, it was about cost and access, enabling companies – boutique professional services firms, smaller financial and legal practices, early-stage start-ups – to occupy premium CBD space without long term lease commitments. Post-Covid, hybrid working introduced a new driver, as a wider range of organisations turned to flex for the ability to adjust their footprint as their working model evolved. 

What is happening now, driven in large part by the AI sector, is different again, and the logic behind it is worth understanding for any business weighing up how it wants to occupy space. Now, the cost of waiting is higher than the cost of flexibility.

A new use case

Over the past six months, our sales team has seen enquiries double, with many of these for 30, 50, 80 desks or more. One AI company recently signed with us for 75 desks at our new 400 George Street centre, opening in July, having outgrown the 36-desk office they had been occupying at another of our locations. 

With a price-per-desk model, 20 desks has traditionally been about the ceiling for flex enquiries, as once you exceed this, a flex arrangement costs materially more than a conventional lease would, and the companies arriving with these requirements understand that perfectly well. What they are buying is speed and the ability to expand into new markets quicker, grow their teams quicker and start generating revenue, quicker! 

A conventional lease takes months of negotiation, followed by fit-out, furniture procurement, cabling and the mechanical and electrical work a functioning office requires. For a company doubling its headcount in two months and racing to get people operational in a new city, that timeline does not fit how they operate. A flexible office in a premium CBD building can potentially be ready for 40 people by Monday morning. When you are adding staff at that rate, being operational in weeks rather than months can and in many cases does, offset the premium.

The arrangement is often openly temporary. The tenant moving to 400 George has told us directly they expect to move into conventional commercial space within 12 months, they just need time. For the flexible office sector, this represents a new kind of purpose - housing large requirements as a staging point between a company's period of launching in a new market and the conventional long lease they are working toward. 

Two markets, not one

Most of the companies taking large flex spaces now will sign conventional commercial leases within 18 months, which is a good outcome for the broader market - the flex space becomes available for the next company that needs it. The boutique professional services firms, growing practices and businesses that have always valued the ability to scale up or down remain the core of the sector's customer base, and they are not going anywhere. What AI expansion adds is a new category of requirement sitting alongside that base, driven by the pace of international growth rather than the size of the company.

Running alongside these fast-scaling tenants is a second effect. Organisation's that have always gone straight to conventional leases are now hesitating because they genuinely do not know what their headcount will look like in five years. AI is reshaping workforce forecasts they used to be confident about. Some are signing shorter, signing smaller, or adding flex as a hedge alongside their conventional footprint. These are established businesses reconsidering what cautious actually looks like when the ground underneath a ten-year lease is less stable than it used to be.

A wider effect

The AI story is the most visible part of what is changing, but the effect reaches well beyond the flex sector itself.

Whether a global tech firm can stand up an 80-person Sydney office in weeks rather than months affects whether they choose Sydney or even another city in APAC for their regional base. Flex workspace can be a small part of how Australia competes for inbound capital. Large short-term tenancies are also helping to absorb premium CBD stock that was under pressure post-Covid, at a pace conventional leasing alone would struggle to match. 

The signal for any business weighing a workspace decision is that speed and optionality have become priced commodities in this market. The question is no longer whether flex costs more than a conventional lease – it is really looking closely at what the premium gets you. 

The service layer has always been part of the flex proposition: concierge, meeting rooms, IT and admin support, the things a smaller firm would rather not manage in-house. For many of those businesses, that service is still what makes the premium worthwhile, but for the newer, bigger cohorts coming through our spaces – the premiums lives in the flexibility, the future-proofing against uncertain headcount, and the ability to be operational in weeks rather than months. 

Agility has always been the founding principle of flexible workspace, the ability to respond quickly to what businesses need without locking them into arrangements that stop fitting. What is new is who is now asking for it, and what their arrival is doing to the rest of the market. The sector has become part of how quickly international capital actually enters Australia and the commercial logic those tenants are applying is starting to pull on everyone else. 

The organisations moving fastest have stopped treating workspace as a price decision. They are paying for speed, optionality and the ability to keep adjusting as their businesses change. The ones still making real estate calls the old way are competing against rivals who have made workspace a strategic lever.