A tight commercial market and a lack of affordability for premium office space has driven small businesses and micro businesses out of the CBD in at least three cities.

Small businesses and micro businesses looking for a well positioned office have been the worst hit by the rise in demand for commercial space in Perth, Sydney and Brisbane—Australia's top three cities with the highest commercial rent, according to the Property Council of Australia's Office Market Forecasts for July 2011.

Businesses in Perth and Sydney will soon be looking to pay more than $830 per square metre, with Brisbane businesses looking at almost $700 per square metre.

Taine Moufarrige, executive director of Servcorp, a global provider of managed workspace, says vacancy rates are getting lower and rents are going up.

"There will be very limited affordable, well located space available for small businesses, even in the fringe areas of the CBD," she said.

The forecast saw commercial vacancy rates as low as 0.5 per cent for Homebush, a growth area of Sydney, and 4.5 per cent for West Perth.

Exacerbating the issue is the limited amount of construction to create more commercial space occurring in these high demand areas. Brisbane in particular has focused on repair and reconstruction in the CBD following the January floods, without adding capacity.

Short supply of offices a medium-term concern

Moufarrige added that the problem is likely to be a medium-term one. "It will be more than a few years before the supply of premium space will even begin to meet demand."

The increase in demand for Servcorp's serviced offices is a clear symptom of the trend, Moufarrige noted. Strong demand for virtual offices — where businesses have the address, office functions and occasional use of a city office without the overheads of traditional space — indicated that home-based businesses were also on the rise.

"Serviced and virtual office space has become one of the few affordable alternatives for small businesses looking to take advantage of a prime CBD location without having the associated overheads normally required with commercial rental. It also gives them added flexibility which is a big benefit in a tight market where conditions change in an instant." he said.

Moufarrige confirmed that Servcorp has been witnessing this situation first hand. “We’ve seen our mature floor occupancy across the country rising steadily since October 2010. Sydney and Perth have been showing particularly high rates of occupancy – consistently hovering above 90 per cent during the past year.”