Mid-year Office Market Update

The latest office market statistics were released by the PCA last week and the results were generally in line with our expectations of the overall CBD performance across Australia.

Surprisingly, Perth CBD achieved an improvement in vacancy within the last 6 months. David Barnes, director of LPC Cresa Perth, provided an insight into the reality of the shift in vacancy and current market conditions.

“Following the sharp decline in commodity prices – particularly oil and iron ore, together with the completion of a number of development projects in the resources sector over the last 24 months, the Perth CBD office market demand will remain subdued for the short to medium term.  Statistics have shown a recent positive net absorption, primarily through an influx of smaller tenants from CBD fringe and suburban areas.  This has been possible following the sharp reduction in effective rents as landlords offer substantial leasing incentives.”

David anticipates this trend to continue although with a likely increase in the vacancy rate following completion of development currently underway.

Sydney CBD’s vacancy rate continued its recent trajectory and decreased to 5.9 percent, maintaining its position as the CBD with the lowest vacancy. Whilst the statistics represent a tight market we are anticipating a rise in sublease offering. Ken Lam, director of LPC Cresa Sydney, said “we are aware of a number of sublease offerings that are yet to hit the market and expect these offerings to come on line over the next 6 months. A factor of the anticipated rise in sublease offering appears to be as a result of businesses not meeting their growth projections. As a result of this it is likely to shift tenant’s focus away from direct space as these opportunities provide tenants with existing fitouts and flexibility on the term.

Melbourne CBD’s overall vacancy remained steady at 6.5 percent with strong tenant demand whilst Brisbane CBD suffered a slight increase from 15.3 to 15.7 percent following the continuation of reduction in demand.

Make Good – Is the Landlord double dipping?

Most leases contain some form of make good provision at lease end and they can become a contentious issue at lease end. Some can be ambiguously worded which can raise doubts over which party is responsible for what at lease end.

However if you have inherited a fitout from a previous tenant or if you are leaving behind a generic fitout that can be used again, it also raises the question how liable should you be for make good? LPC Cresa’s Julian Kurath gave his insights into the matter on Commercial Real Estate.

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Announcement: New Equity Directors

LPC Cresa is pleased to announce the appointment of two new equity directors, effective 1 July 2017 – Julian Kurath and Ken Lam, both of whom are based in our Sydney office.

These appointments recognise the significant contribution that has been made and will further strengthen the LPC Cresa Senior Leadership Team and our direction into the future.

Julian and Ken will continue to drive the LPC Cresa model of tenant / occupier only advice and representation. No investor landlord work and totally conflict free.

This now brings a total of 6 equity partners in our Sydney and Perth offices, being David Barnes, James Carslaw, Julian Kurath, Ken Lam, Geoffrey Learmonth and John Reed.

For further information, please contact Geoffrey Learmonth or John Reed (in our Sydney office on 02 9235 1300)

 

Julian Kurath

 

Ken Lam

Growth Companies: When and Why to Move to Direct Office Space

The Pro’s and Con’s of Shared Office Space

Co-working spaces are ideal environments to grow and launch start-ups and small businesses. They’re an affordable option, and provide an energetic environment that fosters collaboration within a team and between different businesses. The all-inclusive business model makes it easy for fledgling businesses to budget their expenses, and the flexible terms and ability to scale up or down as needed are ideal for early stages of business growth.

But there comes a point for many businesses when shared office space starts to feel a bit… cramped. You need more privacy, more elbow room, and the space to allow your emerging culture and brand to take root. It can also become challenging to obtain economies of scale within a co-working space that charges you the same flat rate for each new employee.

Why Move to Leased Space? What are the Benefits?

Shared office space is a comfortable beginning. It’s probably been good to you and your team. Even though you feel the pull for a more dedicated, personalized work space, a lease may sound like a huge commitment. Is it necessary?

You don’t have to move to a lease. But there are several concrete benefits that make it both appealing and a smart business decision.

Culture & Identity:
A leased office offers your company the freedom to tailor the aesthetics to fit its personality and the way you like to work. That may mean bright paint colors, modern furniture and lighting, open collaborative spaces or close walking distance to restaurants and shops. Co-working spaces are where they are, and you have to go to them. Leased offices are everywhere – you find the right one to fit your business now and what you want it to become.

Productivity: 
What tools does your team need to be productive? Are you able to set all of those tools up the way you need to in your current shared space? Do you have access to a white board when you need it, or silence when you really need to focus? Is there enough meeting space, and is the wifi fast enough? It’s difficult for people to be productive when their environment isn’t arranged to support their work style and needs. With leased space, you can create an environment that will help your team focus and be productive.

Recruiting Talent: 
It’s tough to recruit the best of the best from co-working space. Period. Potential hires want to see that you’re investing in the company’s future and that there seems to be real traction and growth. While an office space doesn’t always mean all of that is true, it does create the perception that you are running a “real” company. And when it comes to recruiting talent, perception means a lot.

Branding:
A different side of the same coin, we’ll call this perception “branding”. When you bring a potential new customer or client in for a face-to-face, you want them to get a specific impression of you and your company. You’ve probably invested in a logo for your business, and a slick website. Your office space should be an extension of that branding.


When is the Right Time to Consider Leased Office Space?

The first answer is that it’s time to start considering a leased office when your shared office space begins to feel restricting. Trust your gut.

The second, longer answer is more substantial and quantitative. While every company is unique and the timing will be different based on your specific business goals and vision, in general, companies should begin to think about leasing their first office when:

  • Market demand has validated your business
  • You have users and your target audience is hooked
  • Day-to-day operations are steady
  • Investor interest is high and/or venture capital backing is secured
  • Employee count ranges from 5-15 people, and is growing
  • If you’ve achieved most or all of these criteria, now is probably the right time to consider a dedicated address as the next