The warehouses attracting corporate tenants

Converted industrial buildings on the city fringe are increasingly catching the eye of corporates.

April 25, 2019

"As long as the public transport is good and the working environment fun and flexible, business will continue to attract quality staff"

Converted warehouses and former industrial precincts just outside major cities have long provided inventive office space and environs for plucky tech starts-ups and creative agencies. But increasingly a new, more buttoned-up neighbour has been moving in: big corporations.

Companies like banks and major consultancy firms are competing for office space in repurposed industrial areas, a move that is perceived as a way to foster creativity while saving on rent compared to traditional city-centre locations.

“Many of our corporate clients have a lot of support or back-of-house staff, and they don’t actually need to be in the city centre,” says Phylicia Cohen, NSW commercial manager for JLL’s Project and Design Services team in Australia. “With the way the rental market is going and the low incentives, it will eventually push a lot of these companies to look to the fringes.”

Commonwealth Bank Australia will be moving into the Australian Technology Park, a 14.5-hectare former locomotive workshop in Eveleigh, Sydney, which is being transformed into a tech precinct.

Meanwhile, in Melbourne, Docklands now accommodates many corporate headquarters, while Collingwood also caters for large office occupiers. In Brisbane, major firms like Arup and Aurizon are joining startups in Fortitude Valley.

The increase in prime office rents in Australia over the past three years of over 30 per cent is giving businesses a clear incentive to locate further afield, particularly if many employees are not client-facing, says Cohen, NSW commercial manager for JLL’s Project and Design Services team.

“These places can be a big change for staff in terms of location, but they aren’t too far to travel from city centres, and as long as the public transport is good and the working environment fun and flexible, business will continue to attract quality staff,” Cohen says.

Many happy returns

The growing interest of businesses, combined with historically low office vacancies in Sydney and Melbourne, is encouraging some landlords to unlock potential in dormant warehouses.

In doing so, landlords are not just providing occupiers with a large, airy space, but also a great story, says Michael Greene, head of Tenant Representation, JLL.

“You’ve got a whole environmental angle around reusing something that was already there and preserving the historical structure of our cities,” he says.

Plus, the creative adaptions are endless: from low-impact mezzanine floors that provide multiple levels, to rock-climbing walls, barista stations, gyms and gaming areas.

Research has proven that levels of workplace effectiveness are substantially improved in employees working in offices that include innovative amenities, especially hobby space, childcare facilities and creative areas.

Companies have found themselves that non-traditional offices can lead to greater creativity and staff-retention levels, Greene says.

Problem Solving

Still, there are some challenges to overcome, mainly due to a lack of existing services in industrial areas, according to Leon Carroll, a JLL project director.

The high ceilings and exposed brick walls of original warehouses can, for example, present insulation and air conditioning issues.

“All of this needs to be considered by the tenant in the initial design process,” Carroll says. “Occupiers should work with design experts to establish what spaces and facilities they need and then think about how the building can be adapted to suit their purpose. There might have to be compromises.”

The basic building blocks can require some lateral thinking, Greene says.

“From a construction point of view, providing the structure is sound - and that’s not always the case - there should be benefit in not starting from scratch. But you do have to import a whole lot of modern conveniences, such as air conditioning, power and data. That can be a little bit of a struggle, particularly as you don’t want to ruin the look or feel of the building.”

The fundamental structure of warehouses can be an additional hurdle. “They are long and low and take up a lot of land, so you don’t get the intense use you get from a high rise building,” Greene adds.

Embracing the blank canvas

However, it is the beauty and flexibility of converted industrial spaces that ultimately stack up. They provide nimble businesses flexibility, they lead to happy employees, and they also ensure landlords benefit from a pattern of long-term leases.

“There is unlimited potential to do something a little less traditional and encourage fun at work,” Cohen says. “It’s an approach that’s key to enticing the best in the business.”

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