Yoga, car fleets among new landlord lures
Yoga classes, access to fleets of cars and dry cleaning collection are among the new wave of creative incentives being offered by office landlords to lure prospective tenants.
The push to attract tenants is strongest in mining-affected Perth than the tighter CBD markets of Sydney and Melbourne, landlords say.
In Sydney, about 6.2% of CBD towers are empty, the lowest office vacancy rate of all the capital cities, according to figures released last week by the Property Council of Australia. Even as the Barangaroo project came online, it was offset as office buildings were converted to apartments or for the construction of the Metro Rail project.
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Vacancy in Melbourne is also comparatively tight at 6.4%. But Perth and Darwin tie for the highest office vacancy rate at 22.5%. Minimal supply is expected to come online across the country over the next three years.
As supply remains tight in the Sydney market, the rental discounts on offer are continuing to fall. Incentives have dropped from the low- to mid-30% range over the past 18 months to about 20%, with expectations of further falls, according to Craig Newman, fund manager of the Charter Hall prime office fund.
He has also seen face rents for Charter Hall properties, such as 333 George St and 9 Castlereagh St, grow to in excess of $1000 a square metre.
In this context, tenants struggling to find A-grade CBD space are increasingly turning to the next-best option.
“Demand for B grade space has gone up and rents have gone up,” Newman tells The Australian.
“But as a result of that strong effective rental growth we’ll see non-CBD Sydney markets start to improve and become more attractive to a lot of corporates as they potentially look to move their back office to Parramatta or North Sydney.”
There are significant opportunities for landlords prepared to work with the customer and understand what their requirements are
Tenants are also attracted by hotel-style or “concierge” facilities, including booking meeting rooms in buildings, dry cleaning services or fleets of cars for tenant use,” he says.
“Some buildings are looking at creating yoga classes and other activities creating community.”
On the west coast, landlords and agents have seen incentives of around 40% in the Perth office market, but these are expected to ease.
“Iron ore prices have increased and that is usually a catalyst for the resources groups to start looking at additional projects,” Newman says.
“We’re getting more confident as resources prices start improving there will be a correlation with office demand.”
The amount of empty office space in Perth has prompted some tenants to consider upgrading.
AMP Capital has invested in lobby refurbishments, bathroom upgrades and building fit-outs at 140 St Georges Terrace, says managing director office and industrial Luke Briscoe.
“We are receiving record levels of inquiries in our buildings (in Perth) because people are wanting to understand what they could achieve,” Briscoe says.
“We’ve had a steady stream of inspections and leased over 5000sqm in our tower in the last 12 months,” reducing the vacancy rate in Exchange Tower from 25% to 10% in the past year.
“There are significant opportunities for landlords prepared to work with the customer and understand what their requirements are.”
This article originally appeared on www.theaustralian.com.au/property.
