Office Market Update
What impacts are Low Office Vacancies having on rents?
The Property Council of Australia’s Office Market Report was released last month. Whilst the predictions around Hobart’s ever tightening office market were realised, with vacancy dropping from 2.7% to 2.5%, some industry stakeholders question how we support private investment moving forward when capitalisation rates are being eroded by tenant incentives and rising building costs.
The lack of commercial property for offices places limitations on new businesses entering the market and how existing commercial lease tenants grow and contract. These constraints usually result in a period of uplift in property owner expectations and rental rates. We have seen this occur already with A grade accommodation now sitting between $400m²-$425m² and B grade in the region of $340m²-$380m².
Are tenant requirements impacting your bottom line?
Tenant requirements have shifted in recent times, with employee comfort and amenity at the forefront of decision makers minds. The impacts of COVID have placed the emphasis on providing a safe and desirable workplace to help entice staff back into the office. Commercial building owners are also seeing an increase in requests for end of trip facilities and premium fit outs.
These ‘value adds’ come at a cost and commercial building owners are having to meet these expectations to attract tenants.
How do you successfully position your asset in 2023?
At MIX, our management and leasing team ensure that you are given a true assessment of market trends and aim to achieve the best possible outcome when negotiating with new or existing tenants.
If you have lease options or renewals pending this year, there may be an opportunity to realign rents and structure new commercial leases that are favourable for the long term.
Negotiations around rent increases can be contentious and at times, lengthy. Our team ensures tenants are provided with adequate information and evidence to support market rental increases and have an open dialogue on how it can be structured to limit any impact on the tenant’s cashflow, whilst sustaining or improving rental growth and the asset’s WALE.
The MIX approach is considered, evidence supported and communicated in a transparent manner that strengthens the Landlord/Tenant relationship going forward.
#yourrecipemixedforsuccess