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The outlook of the commercial property sector in 2019: Melbourne, Sydney and Brisbane

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Regardless if you’re a landlord, a tenant, a real estate representative or a barista working in the heart of these CBDs, you would know the pressures on commercial office spaces in the current Australian climate in some way shape or form. These commercial spaces are in incredibly high demand, yet such low supply — it’s got everyone talking… and concerned until 2020/2021 arrives.

In a recent trend and outlook report released by Cushman & Wakefield Australia, the commercial property sector is in for some big changes in 2019, both good and bad. Here are our four key takeaways from the report.

 

Vacancy is still a problem

 

It’s no surprise that vacancies are still so tight in the bustling CBD areas. However, the squeeze is starting to feel especially cosy in Sydney and Melbourne, with a further decline in vacancies for these two major cities. Melbourne may get a little relief, as vacancy rates are expected to rise marginally, despite the vacancy rate dropping well below the predicted 6 percent, at 3.6 percent this year.

Brisbane still remains the most tenant-friendly city in which to find new office space.

 

Lack of negotiation flexibility

 

With the Sydney and Melbourne CBD vacancies at near record tightness, the disparity between tenant and landlord flexibility is greater than ever. The negotiations on any new space are extremely difficult when deciphering what tenants want, and what landlords are willing to offer.

Sydney tenants have become much less flexible in the negotiation of their needs and the Landlords don’t consider themselves flexible either. It’s face rents that are driving the negotiations.

In Melbourne, it is appearing even tougher as the landlords are not flexible when it comes to these leasing negotiations, and neither are the tenants as they want greater incentives.

Brisbane is still considered to be the most flexible city to negotiate an office lease on the market.

 

Assets are important

 

In the commercial property realm, tenants have the opportunity to be choosy when it comes to their surroundings, especially given the prices they are forking out on rent. It is reported that natural light and open plan facilities have risen to tier one concern for these working professionals, and have become the highest attribute in leasing terms.

Secondly to this, financial affordability, value for money and geographical location are still concerns for tenants, followed by building quality, size, and services.

 

So, what next?

 

Navigating the great divide when it comes to tenant expectations and landlords rules is no easy feat. At CR Commercial Property Group, we specialise in reducing occupancy costs, locking in competitive rates for our clients and cutting out painful approval processes. As the saying goes – it’s not what you know but who you know, and the relationships that exist with the right people.

Given the difficulty of the markets, it doesn’t need to be harder than what it already is. CR Commercial Property Group provides unparalleled tenant advisory and tenant representation services for our clients in Sydney and other capital cities around Australia. We help you decide whether to stay or go in these markets, secure the best financial outcome and or redesign your office plan to most space efficient and effective use. All without business disruption.

 

Get in contact with us today to see how we can assist you.

George Jetson thinking about commercial property

Is your workplace ready for 2022?

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Are you future-proofed? Colliers International recently released its global workplace trends report, Five shifts companies must make in the next five years — a result of a year-long collaboration between Colliers Workplace experts. Here are five key shifts that will rock our workplaces leading to 2022:

Employees will be at the core of business strategies

Environments that bring out the best in employees will be crucial to business success. According to a study completed by the Harvard Business Report, three-quarters of employees are not engaged. In business, we talk a lot about the ‘customer experience,’ but what about creating a superior ‘employee experience’? Think interesting seminars, fitness classes, organising spontaneous moments like easter hunts and Santa visits at Christmas. But what about 2022? The global workplace trends report suggests that corporations will eventually introduce the position of a Chief Experience Officer (CXO). Their main responsibility will be to develop and foster a workplace that is employee focused.

So… ‘bring a kitten to work’ day is going to increase productivity, right?

Millennials will introduce the ‘Internet of Workplace’

Businesses will need to start to integrate this sophisticated technology into the workplace (and no, I’m not talking about upgrading your Nespresso machine). By 2022, Generation Z will make up your entry-level employees while millennials will occupy a significant portion of middle-management and key decision making positions. Think personalised workstations, facial recognition and smartphone integration, virtual concierges, and state-of-the-art meeting rooms. Additionally, with automation currently impacting businesses, the report further urges companies to compose strategies to tackle this hurdle.

Q: How did the hipster burn his tongue? A: He drank his coffee before it was cool.

Workplaces will be healthier

Wellbeing is becoming an important aspect of the workplace — both physically and mentally. With workstations now including stand-up desks and ergonomic seats, its prominence is clear. Furthermore, we are seeing more corporations providing their employees with fitness memberships and complimentary lunches. However, the global workplace trends report predicts that the physical design of workspaces will be one of the main focuses when it comes to wellbeing. According to Human Spaces, employee wellbeing and productivity can be increased up to 13 per cent in response to the presence of natural elements in the workplace — something we discussed in our previous blog. Another area that the report predicts is the blend of technology and wellbeing. Imagine if employees are provided with fitness wearables. Companies could then analyse the vitals of their employees including their heart rate, stress levels and whether they’re moving enough.

When Sharon encourages the entire accounting department to participate in ‘Steptember’.

Coworking spaces will become the norm

The concept of ‘coworking spaces’ are becoming widely accepted — particularly for coolcats like millennial startups and freelancing creatives. According to Small Business, by 2020, there will be 26,000 coworking locations with 3.8 million members. Interestingly, the report explains that larger, multinational corporations are starting to move employees to co-working spaces and eventually will take on flexible workspaces to offer to clients.

How I feel when my boss tells me I’m moving to a co-working office.

Become agile, or be left behind

Heading into 2022, business owners will need to rethink their workforce — enter the #trending term, ‘agile structures.’ This idea of working focuses primarily on flexibility, collaboration and viability. According to the report, the idea of agile working “embraces change, which contradicts the traditional project approach in which teams define detailed specifications and create formal processes that largely seek to avoid change.” Ultimately, it’s the team’s needs at the central focus of a workplace, rather than the individual.

There’s no I in team, but there is in pizza!

Want to know more? I encourage you to read the full report here. 2022 seems a few years away, but there’s no harm in considering how you can start to implement these progressive shifts now. Talk to us today and see how CRCPG can help.

tom and jerry tenant agreement

Five ways to get a better deal on your existing office lease

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Are you beginning to notice your free seat on the morning commute being filled? Or, maybe finding a car space is a lot more difficult? And, what about those commercial property vacancies?

It’s no surprise that property leasing prices have skyrocketed. According to Sydney Morning Herald, A-grade office rentals in Sydney have risen 12.6 percent over the year up until June 2018, with the average office prices now sitting very pretty at the $1,030 per square metre mark.

With a combined average of only 4.1 percent of Sydney and Melbourne’s property vacancies available, businesses are feeling the squeeze… (and we don’t just mean on the overcrowded trains).

Rent Increase Gif

It’s not you… it’s the landlords

In this property climate, the chances of scoring a hot new commercial property deal with the incentive covering a new office fit out are slim to none. And capital contribution fit outs won’t be coming back anytime soon, with the property landscape staying this tight until around 2020 to 2021. Yikes.

So, if you can’t get your business into a brand-spankin’ new crib and your current lease needs a lot of work… what’s next?

We say work with what you’ve already got, and do it your way.

There are a variety of benefits for shoring up your current lease, but there’s no need to go in blind. We’ve got five tips on how to renew your current lease terms to get a better deal:

1. Build a relationship

Rapport, good communication, and transparency are key to any successful partnership, and building a relationship with your landlord is no different. Getting to know your landlord allows you to be more flexible when it comes to renewing your commercial property lease. If you’ve got a tenant history that’s as shiny as the dollars you always pay on time, you should have no problem getting your landlord on your side.

2. Start early

It’s likely that your landlord will wait until your lease is almost complete before they consider starting a conversation about it. For you, time and effort put into finding a space, as well as packing up and moving is just not worth it. It puts tremendous pressure on you as a business owner – leaving you with no choice but to pay the inflated asking price.

Beating your landlord to the punch allows you enough time to come to a mutual agreement. Begin the conversation 6 to 12 months before your lease is up, and remember to keep an email trail and records of any verbal agreements.

Law And Order Nbc GIF - Find & Share on GIPHY

Now is your time to put those endless hours of watching Law and Order to use.

3. Do your research

Knowing the landscape of market conditions allows you to come to a fair compromise that will work out in your favour – which is where an industry adviser can help. This ultimately means you might finally have the budget to buy that in-office bar and snooker table!

Remember, there’s pressure on your landlord here, too. The last thing they need is an empty office space in a few years time, so use this to your advantage.

4. Give and take

Landlords appreciate a little bit of give and take in your leasing negotiations but in this property cycle, there is less giving and more taking.

Consider offering to sign on for a longer lease period. This means your landlord can count on you for consistent income and can lock you in for the upcoming oversupply of office space in 2021. It’s a win-win.

5. Get a professional on your side

Are you thinking about renewing your lease? When you work with professionals, you’re leveraging extensive industry knowledge, leasing advice and decades of training in the art of the negotiation. It’s a specific skill – and it is gained from experience.

Kennedy Meme

CR Commercial Property Group offer services such as tenant advisory and tenant representation for this exact purpose, and we handle the whole process for you. If you’re looking to renew your commercial lease, or need some advice, get in touch.

office fit out design photo

4 ways to slay the office design game for retention, productivity & wellbeing

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Don’t judge a book by its cover, right? Wrong, we’re all guilty of it. Brain studies have shown that when you see an attractive product (for us, it’s triple glazed chocolate doughnuts with sprinkles), it triggers the part of the brain that governs hand movement. What does this tell us? We reach out to touch things that we find beautiful.

I doughnut regret anything. 

What has this got to do with the commercial property sector?

In 2018, organisations should be investing in creating workspaces that are aesthetically pleasing for their employees. Because, employee well-being comes down to productivity, performance and job satisfaction. A slip in well-being can have detrimental effects on a business. One of the largest contributors of wellbeing is the physical space in which we work. So what makes an office space a solid ten? Well, beauty is in the eye of the beholder; what might be attractive to someone may not be to another (mustard yellow walls were never my thing, but each to their own). However, there are four key design principles you can follow to lift your office performance:

Incorporate open spaces in your floor plan

Eighties-style cubicle farms aren’t trending – they’re about as cool as frosted tips or crocs with socks. According to The Predictive Index, sitting for eight hours a day, staring into a monitor with fabric walls as your only company, encourages poor engagement. Over time, it may lead to anxiety and isolation… much like our friend here.

Nobody puts Bobby in the corner.

It’s all about the open flow, maaaaan. Not only are open space offices more attractive and light-filled, but they encourage workplace unity. When office floor plans are open, employees feel part of what’s going on around them, and they can better build relationships with their co-workers through collaboration. According to the team at Volaris, “in order for businesses to grow, we need to improve collaboration; success lies in the flow of ideas between co-workers and departments”.

Consider creative break-out areas

Employees approach their work differently, so consider offering diverse workspaces. Some of the world’s biggest companies have thought about this when designing fit-outs. Take enterprise application software company SAP for example, which offers a variety of spaces including open plan desk arrangements, private spaces, an innovation hub, a co-working cafe, conference rooms and meetings rooms. (They’re just missing the Bikram yoga studio, but perhaps I’m asking for too much).

And, millennials are some of the most discerning when it comes to their workplace. Commercial Real Estate explains, when it comes to office design, the words ‘corporate’, ‘dull’ and ‘boring’ are not in their design vocabulary. There’s an expectation that “future workplaces should be about flexibility, slides, craft beer, ping pong tables, and even go-karts in offices”.

So we’re not expecting you to go and rip out your printing room and replace it with a karaoke bar with a smoke machine, but think about how your current office space might be impacting your employees.

Breathe in the good stuff, exhale the bulldust.

Add visual stimulus

No one brings boring Barry to the party – don’t be afraid to show your company’s personality through your office space. Visual stimulus can impact employee behaviours, moods and attitudes and that colour can even affect things like as perceived room temperature and ambience. Similar scientific studies have shown that colour can positively impact productivity in the workplace.

When to comes to colour picking… just not beige. No one is friends with beige, okay?

Even artwork can have a profound effect on the mood of employees. A survey completed by the Business Committee for the Arts and the International Association for Professional Art Advisors drew responses from employees working in multiple industries, ranging from food distributors to law firms. The results found that art in the workplace help address key challenges in business, such as reducing stress (78% of participants agreed), increasing creativity (64% of participants agreed) and encouraging expression of opinions (77% of participants agreed).

Go green

In recent years, there’s been considerable research into the benefits of plants in the workplace. A 2017 Harvard University paper, found that the cognitive performance of employees that worked in a green office space was double that of those working in conventional environments. *Puts glasses on* This phenomenon is called ‘biophilia’ and illustrates the idea that plants have a profound impact on humans and can generate positive physiological responses including lowering your heart rate and increasing brain activity.

Do you need some encourage-mint?

Whilst you’ve probably got a couple of plants around the office (do they need watering?), there are some interesting ways that you can increase their effectiveness. If you already have an open plan office, troughs can be used as walls to separate meeting and breakout areas. Or, incorporate a green-wall or vertical garden to make a bold design statement. If you’re limited with space, try quirky alternatives to standard vases and pots.

Ready to design your office for better ROI?

There’s no question that a well designed office space is a smart return on investment. But, don’t be afraid to think outside the box to lift the visual appeal of your office space. Consider your business and its values and bring this to life visually. But, most importantly, think of your employees – what’s going to bring the best out of them?

If you’re thinking of a change, reach out and have a chat with us. Redesigning and designing attractive fit outs is what we do best. Get in touch.

 

commercial property negotiations with palatine image

5 commercial lease negotiating tips that The Godfather would be proud of

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You thought friands were getting expensive – which is ironic considering they start with ‘free’ – but Sydney’s real estate market is worse still (and not nearly as sweet). Housing costs are rising quicker than the Uber shares, yet sold signs are popping up everywhere – marking sales that have gone 20% or more over the price guide.

So, do you want the good news or the bad news? Let’s start with the bad first (it hurts a little less). Unfortunately, this is happening in the commercial sector too. With steady business growth and increasing employment, there’s now high demand and low supply when it comes to commercial office spaces. In Sydney today, the average rental cost is close to $1,100 – per square metre per month. Ouch.

So why do we feel like we’ve copped a squeezed lemon to the eye? According to Commercial Real Estate, Sydney CBD’s office market outperformed well over the first quarter of this year. Additionally, 143,000 square metres of commercial office space was requested by prospective renters between January and March, a jump of 37 percent in comparison to 2017. There’s also been a number of stock withdrawals, major construction projects falling through or being postponed in and around the CBD.

All of this commercial activity has had a knock-on effect on rental yields. We hate to break it to you but, for many commercial tenants, there’s no rental relief in the coming months. Commercial Real Estate predicts this respite won’t be felt until 2019-20, “when major projects like 60 Martin Place and Wynyard Place are completed and provide more supply.”

In Sydney rent is a growin’ and that rent ain’t a slowin’. Image courtesy of Commercial Real Estate.

 

Now that we’ve got the worst part over with, we did promise you some good news. If you’re a new business looking for a commercial office or perhaps you’re ready to relocate to somewhere bigger, all is not lost. You just have to be prepared to switch up your strategy. As Mike Tyson famously said, “everybody has a game plan until they get punched in the face.” In a dynamic and competitive market, be prepared to move quickly and efficiently. This all comes down to the art of negotiation and fancy footwork.

Picture this… you’ve found your perfect office space. You’re already visualising how you’re going to put your expensive feng shui Groupon training to use: You know exactly where you’re going to run your brainstorming sessions, where the Nespresso machine is going, and where you’re going to put the water feature for harmony. But remember, for any business owner, rent is one of your biggest expenses, and you could be locked in for a while. According to BDC’s Major Account manager, Brett Prikker, it’s absolutely imperative to read through a lease thoroughly before signing it. “It’s surprising how many businesses sign a lease without reviewing it,” he says. “They just sign whatever they are given by their landlord, but leases are typically open to negotiation.”

Most of us will be familiar with negotiating: shouting single-digit figures while pointing at a “Gucci” cap in a crowded Balinese marketplace where there’s wafts of cabbage. But, effective lease negotiation plays out a little differently. For you, it means avoiding hidden costs and nasty surprises, having clarity around terms, and requesting inclusions that will benefit your business in the long run. So, if you’re ready to play ball, then read on. We’ve put together our top five (totally legal) negotiating tips that Vito Corleone would be impressed with:

Do some recon on the building

Okay, so you’ve found the one, but first you need to channel your inner Horatio from CSI – indoor sunglasses and all. Before even starting any negotiations, spend some time researching the crime scene.. sorry we mean building. It’s during this sleuthing that you might unveil invaluable information that will help you when it comes down to crunch time. Take a look at the building tenants and prospective neighbours. Do their services align with your business values? Are any of the surrounding businesses potential competition? The last thing you want is to sign a two-year lease to then find out that your neighbour offers the same services as you.

Reaching out to current tenants can give you an idea of the building itself: for example, when was the last upgrade? What’s the property management like? Are the facilities up-to-scratch? How are common areas used between tenants? (Remember, there’s always that one person who leaves food scraps in the sink.) If you’re not planning to utilise any common areas, then you could negotiate this out of your lease.

Know the market, know your numbers

One of the most important aspects of negotiating a commercial lease is agreeing on the final figure you’ll be paying regularly. So do your homework, and get to know the local market. Spend some time analysing the commercial office rent prices in the area, so when it comes to negotiating the lease, you have a clear expectation of what you should be paying for your space. If it’s obvious that the agent or landlord is asking for too much, you can be a little bit smug, because you’ve got industry figures to justify your request for a lower number ready in your back pocket. Whether you like it or not, landlords love increasing rent (and counting money in their spare time) – so knowing these numbers will give you a clear idea of what sort of rental increases to expect over the next few years. It’s here you can ask yourself, is this affordable?

Seek out those hidden costs

Go through the lease terms. Then, do it again. It’s extremely important to be aware of any hidden costs woven into the lease document, and these add-ons can vary from office building to office building. Just because maintenance was covered in the last space you rented, doesn’t mean this is the case is your new one. These costs might cover utilities, upkeep of common areas or car spaces. Once you’re aware of these costs, whip out your calculator and go Einstein on your numbers. Use a matrix, mind map, formulas or even an abacus to calculate if you can afford the rent as well as any additional fees. It’s here you can negotiate your own terms. For example, you might request the rent to increase slightly in favour for the landlord to cover all of those extra costs.

Consider the length of the lease

So everything is looking a-okay so far and you’re ready to proceed with the paperwork. Now you need to think about how long you will require your lease for. Is this your first time renting? As Small Biz Trends suggest, given the fragility of a starting a business, you might not want to get tied into a really long-term commitment. Always have a backup plan if everything doesn’t quite work out. On the other hand, if you’re already established, then consider the fact that you might outgrow your office. For example, if you end up hiring more team members down the track, you might need extra desks or offices. There’s nothing worse than having an office space with the ambience of a fried chicken takeaway joint on a Friday night.

Request your own clauses

It might surprise you have the right to modify your lease. Treat your lease as you would a Create Your Taste burger at Maccas. You might not be the onion type, but my goodness you’ll order the double cheese. Much like the extra bacon, pick and choose clauses that are favourable to you and your business. Whilst the space might be almost perfect, there might be some improvements needing to be made. Maybe it needs a little bit of an upgrade prior to you moving in? For example, maybe that late 90s, off-yellow carpet has to go. These are the types of things you can negotiate prior to signing the dotted line. We talked about competition earlier – imagine if one of your competitors moved right on in next door? You can negotiate a clause that stops this from happening. Finally, it might be worth exploring the capacity to sublet your space, particularly if your business circumstances change, should you choose to move or close.

Ready to use your bargaining power?

Taking over a new office space is exciting for any business owner. It might mean taking a leap of faith on a startup, a change of business direction, growth, or a chance to impress your conservative parents. No matter your business circumstances, it’s imperative that you plan, review and scrutinise your lease agreement and terms. Understand your legal positioning and negotiate with confidence.

At CR Commercial Property Group (CRCPG), we’re The Godfather* when it comes to everything commercial leasing related. Whether you require assistance sourcing a new office location, designing and implementing a new fitout, or need someone to take care of those crucial commercial property decisions, then our team is here to help (*cigar not included).

Get in touch today.

apple and orange getting tenant advice

When is a deal a deal? The secret to getting the best deal on a new lease

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STAY PUT VS NEW LEASE

You have been in a workspace for a number of years. You and your employees are happy with the location and could probably make the drive with your eyes closed.

You know your lease expiration is quickly approaching and you, of course, plan on extending the lease.  Although providing notice on your current lease may seem like an easy decision, you could be costing your company by not pursuing all options and evaluating the market. This point is when the landlord has all the power, and where a tenant advisor can give you the leverage you need.

So, what does a tenant advisor do? And why would you partner with an advisor?

A tenant advisor works for you and your best interests.  Using employee, company, and customer data, an advisor can help you understand your specific needs and assist you with space forecasting for 3, 5 and sometimes 10+ years out. They’ll consider questions such as: how much square-meterage do you really need?  What location makes the most sense for you?  What rate should you pay compared to others in the market?

So, in summary:

  1. Tenant advisors bring all available space to the table. While landlord representatives may be biased to the space that they are representing, tenant reps have no allegiance to landlords. This allows you to see the full market and grasp all market options and prices.
  2. When the tenant advisor compares properties, “apples-to-apples”, they are able to show how “hidden” costs can impact the rental rate per year and over the life of the lease.
  3. As a tenant, you may see a lease document once every 5, 8, or maybe even 10 years. The tenant advisor see’s hundreds of leases and has the advantage of knowing market averages and what articles may need to be included in the lease.  Leases are typically drafted by the landlord, meaning they are written in the landlord’s benefit.
  4. Negotiations are a process with a lot of back and forth. Since the landlord will be taking care of you and your space for the term of the lease, having a tenant advisor mitigate the transaction can ease any harsh feelings that may occur.

These are just some of the examples of how a tenant advisor can help you gain leverage with your upcoming lease. You owe it to yourself and your company to seek professional guidance in any lease transaction, so get in touch with the right help today.