Overall, the Sydney CBD market continues to strengthen in favour of the Landlord. However, it is important to clarify that across the various size cohorts and grades within the market there are differing levels of market performance.
The strongest sector remains in the suite or sub 500sqm size range, as the reality of displacement finally sets in for these tenants. The lack of availability in the A and B grade market increases pressure for those tenants to either step up in quality, or step out of the direct leasing market into serviced offices or co-working space. We expect the competition for space in this sector of the market to peak in Q4 2016, which is compounding the rise in face rents and reduction in incentives.
Whilst there are a number of larger requirements still yet to land, the market availability for contiguous space greater than 3,000sqm is very limited, accentuated by strong leasing activity in Q3.
Proximity to transport, amenity and activation all lead from the need to attract, but more importantly retain talent. The more transient workforce that is coming through from the millennial generation are focused heavily on these three key areas and forward thinking businesses (and some landlords) are responding to these needs positively.
These trends are now well entrenched in the Sydney CBD market, the challenge now is to focus on the next wave, which we would be happy to discuss.
Online enquiry has been the strongest in 2016 than we have ever seen before. In the past, online enquiry was limited to smaller suites, but we are now seeing tenants from 100sqm to 5,000sqm enquiring online. Digital is a huge focus for JLL and our clients to ensure that we are responding quickly to the dynamic market and the thirst for quick response times and easily accessible information.
Communal or third space, top quality EOT and online portals for existing tenants.
Head of Leasing - NSW
+61 2 9220 8721
North Sydney is performing strongly across both Prime and Secondary grade office premises, as stock withdrawals and inherent business growth drive demand. This has had a positive impact on effective rent growth; both in face rents and marked reductions in incentives across all office grades.
The days of tenants having a number of premises to choose from, no longer exist. There is a shortage of stock particularly in the sub-500sqm sector across all key markets of North Sydney, St Leonards and Chatswood. We have tenants competing for the same areas, particularly fitted spaces.
Without doubt the daily tenant experience within the office is improving - driven by our clients wanting to ensure their customers (tenants) have amenity at their fingertips, whilst the building services the everyday needs of their staff. End of trip facilities in A and B Grade buildings have substantially improved, concierge facilities are being considered by a number of our clients and tenants now have their own portals, with the Landlord or Property Manager, providing them up-to-date information on activities and events both within the building and within the CBD.
Property portals continue to drive enquiry. Property search starts online so we continue to ensure listings are impactful and visible across relevant sites.
End of Trip facilities and general on-floor refurbishments are the significant improvements, as Landlords move to improve the on-floor and work-day experience for tenants.
National Director, Leasing - NSW
+61 415 909 871
With such significant development occurring within Parramatta’s CBD, we’re currently experiencing the calm before the storm
It’s all about being conservative at the moment, cost control and keeping current staff happy.
Parramatta is emerging from a cost conscious business accommodation CBD into a rapidly regenerating place to be. Infrastructure projects are providing a platform for the next wave of redevelopment, and the CBD is becoming very busy.
Digital banners and websites
Lobby mainly, primary concern is presentation and DDA facilities in older buildings.
Associate Director, Leasing - Parramatta
+61 2 9806 2800
Exceptionally well, predominantly due to the displacement of tenants from commercial buildings in Macquarie Park being sold for residential re-development. Other drivers have continued to be the consolidation of two or more separate businesses through M&A activity. Additionally, enquiry for the relocation of back office operations from the CBD has surfaced as a cost cutting initiative.
Market fundamentals via the tight vacancy rate in Sydney Olympic Park contributed to a moderate increase in prime net face rents this quarter. Similarly, Norwest has had a reasonable performance with positive 2,900sqm of net absorption recorded in 3Q16. Tenant enquiry across these two smaller markets has been driven primarily by construction and strata companies in the 200sqm range.
The ability to accommodate their business over a single, large floor plate of 1,500sqm - 2,500sqm has been a strong driver for tenants, in both traditional open plan configurations, and flexible workspace fit outs. Proximity to public transport and amenity are other key considerations, in addition to good parking for staff and visitors.
Potentially yes, as Landlords try and differentiate their product in Metro markets where such services are generally not available.
We generate enquiry from a variety of marketing channels. You can never rely on a single source, and need to spread the net as far as possible.
We are seeing a host of upgrades across the market, especially in assets built 10 or more years ago. These include façade replacement and /or painting, lobby refurbishments, landscaping beatification works and installation of end of trip facilities.
Regional Director - NSW
+61 2 9936 5876
Whilst large occupier activity has continued, decision making and progress has slowed. The brokerage market has remained buoyant with several transactions sub 300sqm being recorded in the quarter.
Cost remains a key driver for decision making, however the creation of unique and flexible workspaces are seeing some requirements morph as tenant briefs evolve.
Conferencing spaces and other customer benefits are now being considered as important attributes of any building in the Prime Grade Market. Onsite amenity and informal meeting areas within the Building’s ground plane are also considered important building features for the tenant market.
Online portals remain a good source of enquiry within the brokerage market.
Lobby refurbishments / installation of conferencing spaces / Lift upgrades
National DirectorHead of Leasing - QLD
+61 7 3231 1315
The Brisbane near city market has remained consistent throughout 2016. Rents have stabilised with incentives and vacancy rates remaining high, stunting any signs of effective rental growth. Demand is weak with many Near City tenants also considering the CBD as an alternative. The flow of tenants from the CBD to the Near City for better buildings at cheaper rates has stalled, however there are pockets of the market improving, mainly the A Grade sector in South Brisbane and Fortitude Valley/Newstead.
Businesses are focused on overall occupancy costs. Workplace flexibility and driving efficiency via fit outs often result in less area and ultimately less rent. This is a major catalyst for tenant moves. Some sectors are experiencing organic growth, however mergers and consolidation is a major reason prompting moves.
Yes businesses are expecting more from their office buildings, especially in the new development space. Businesses want access to more than just their office floor - Business Centres, shared meeting rooms and roof top terraces are all being well received. Landlords are embracing technology with WiFi enabled foyers and public spaces.
Property Portals remain the best source of enquiry, however it is the role of the agent to understand tenant needs, and adapt the pitch prior to them formally entering the market.
End of Trip facilities, ground floor retail, exposed ceilings and additional services e.g. concierge
Associate Director, Office Leasing, Queensland
T: +61 7 3231 1348M: 0402 792 238F: +61 7 3231 1314
Very strongly, net absorption is resulting in effective rental growth.
The strong demand for project space, resulting from the metro rail project, has ensured most fitted and furnished options have strong tenant interest, especially those areas located on the northern fringe of the CBD.
Co-working space continues to form part of all development schemes, whilst concierge services are being extended to include end of trip facilities.
The sub 500sqm tenancy market continues to respond to both onsite signage and property portals, however with the increased penetration of advocates into this market, we anticipate demands to source market options from a broad source of avenues. There continues to be an increasing number of larger requirements that are not formally entering the market via the use of a market brief.
Lobby refurbishments, lobby refurbishments & lobby refurbishments! A range of examples are underway. A simple example between Elizabeth & Queen St on Collins St includes: 350,360,367,379 Collins St alone. Many more example will emerge during 2017.
Head of Leasing - Victoria
+61 3 9672 6531
Availabilities within A grade assets continue to be the most actively sought after by occupiers. Refurbished B grade assets with quality functional fit-outs also remain in favour, with the price point being a considerable factor. With a distinct lack of availability within fringe markets of both A Grade and refurbished B Grade assets, occupiers are exploring alternate markets, most notably CBD & Southbank.
There are a number of new developments and significant building refurbishments in the pipeline that will fulfill tenant demand for high quality product. The pre-commitment market will be a prominent part of fringe markets throughout 2017 and beyond.
Understanding a business’s key drivers is crucial to leasing success. Occupiers continue to want maximum flexibility to grow or contract throughout the term of lease. Whilst this remains challenging for landlords, it is imperative that landlords and their management team are in continual dialogue with their tenants throughout occupation, to ensure the ‘jigsaw puzzle’ of keeping a building at full occupancy can be achieved.
These elements are less evident (if at all) within fringe markets. Fringe occupiers remain focused on locations that provides good access to public transportation and staff amenity. Building grade quality remains a high priority.
Digital marketing remains the most obvious source of initial enquiry. The ability to then provide detailed and creative marketing materials, with professional imagery and technical information, assists with encouraging tenant engagement to negotiation.
Landlords are aware the tenant inspection experience needs to impress potential tenants and their representatives. Whilst it’s not always feasible to have new entry foyers, lift lobbies & EOT facilities, it is imperative to ensure that any vacant space is presented at the highest standard, to ensure potential tenants don’t dismiss the opportunity. The quality of lifts, air conditioning and bathroom areas are imperative to ensure these areas present & function at an optimal level. Whilst financial parameters are typically key to all leasing outcomes, attention to these items ensure the occupier inspection experience is a positive one. Landlords must be mindful a potential tenant may seek feedback from other building occupiers regarding their occupancy experience. These recommendations can often be critical to leasing success.
Key presentation items for Landlord to consider:
Associate Director - Victoria
+61 3 9672 6636
We are seeing real constraints on supply in the inner metro market which is resulting in good effective rental growth. There is strong demand particularly in this precinct. This is in contrast to outer suburbs where vacancy sits above 15%.
There seems to be a continued migration of tenants from the outer suburbs to the inner suburbs. The key drivers being better access to talent and retail and transport amenity.
Serviced office and co-working groups are very active, particularly in the inner metro markets. We are also seeing strong demand for precincts like Chadstone, where the new speculative building of 17,000 sqm is now fully committed. The tenants predominantly have retail backgrounds.
Property portals and market tenant briefs are the most effective channels for capturing enquiries, with tenants preferring either the services of an advocate or a desk to search property availabilities. Traditional signboards are becoming less and less effective.
End of trip facilities in older buildings are definitely a focus for lessors. Also, many landlords are looking at lighting upgrades to T5 or Led to create better, more efficient working environments.
Director, Office Leasing,Glen Waverley
+61 03 9565 6617
Sentiment is currently positive in Canberra and this trend is likely to continue over the short to medium term. The tight prime vacancy rate is allowing landlords the opportunity to increase prime face rents higher and decrease incentives. The subdued office supply pipeline will keep also help to keep this trend in motion throughout the year. On the leasing front, reshuffling and consolidations by multiple local government departments this quarter contributed to 6,000 sqm of positive net absorption. The private sector has been active in the sub 1,000 sqm cohort with leasing activity witnessed amongst media communications, IT and consulting firms.
We are currently seeing tenants from both the public and private sector seeking to gain greater efficiency and value for money.
Workspace provider, WOTSO, has been active in spreading its co-working philosophy over the last two years both nationally and in Canberra. We see this trend continuing as well as a continued push for more flexible working environments via ABW.
Tenants are enquiring and expressing interest primarily through digital channels, particularly portals; signage and networks.
We are also seeing refurbishment works being considered on a number of government buildings. These plans look to improve upon existing space to accommodate for designated conference areas and staff training rooms. 2 Constitution Place has recently been fully refurbished with modern amenities and office working spaces facilities featuring in this building.
Managing DirectorSales and Leasing - ACT
+61 2 6274 9818
Owners are upgrading building via Lobby refurbishments, end-of-trip and speculative fitouts.
Regional DirectorHead of Leasing - WA
+61 8 9483 8423
The market remains slow with demand generally weak. Enquiry is strongest amongst smaller tenants but some larger requirements are still yet to be fulfilled. There continues to be a trend towards consolidation and rationalisation of tenancy space, which has led to centralisation into better quality buildings in the CBD.
Many businesses are still focused on profit protection through cost reduction. There is still a degree of caution amongst most private sector tenants with many seeming reluctant to commit to large capital expenditure (required to construct a new fitout or relocate an office).
The co-working, serviced office and small tenancy market is strong with many different service providers offering different experiences within this space. Adelaide is yet to see larger corporate property owners choosing to devote office space to this use, but several local private owners have established co-working businesses within their own portfolios as a way to mitigate long term vacancy.
Direct canvassing is the most effective way to drive enquiry. Utilising good lease expiry information and local contacts, and building relationships with tenants, advocates and key influencers is still important. Online listing websites continue to be good for smaller tenancies, signage seems to work best in the suburban market.
Upgrading end of trip facilities, lobby refurbishments and bathroom/amenities upgrades are the three areas that will drive the greatest benefit through refurbishment.
Head of Leasing - SA
+61 8 8233 8898