Australia
What Do Tenants Really Want When Leasing Office Space?

What Do Tenants Really Want When Leasing Office Space?

Every city has its hotspots but there are several ways you can make sure your office space is appealing, no matter where it is. So what do companies really look for when leasing office space? And what will they pay a premium for?

Eco credentials

Reflecting a strong global trend, prospective tenants in the Australian market are increasingly seeking office space in green buildings.

Research shows green buildings attract a greater number of tenants, with 65 percent of those surveyed saying client demand was an important factor in committing to these spaces. Landlords in turn also reported lower vacancy periods and increased occupancy ratios of 3.5 percent. 

In the Australian market, buildings with a higher NABERS rating or Green Star certification have the potential to attract greater capital values and rental returns. According to a study led by the Australian Property Institute, a five-star NABERS energy rating delivered a nine percent green premium in value, while a five percent green premium in rents was evident for the Green Star rating.

Premiums understandably vary by location. For a five-star NABERs energy rating the Canberra office market showed the largest green premium in value (21 percent), while the Sydney CBD office market delivered the largest premiums in rents (three percent).

As local and global data shows, ‘going green’ is a proven way to differentiate your office space from the pack, leading to increased capital value as well as higher rental returns.

Technology 

Most companies expect their building to be capable of introducing and supporting technologies, such as wireless networks. Some landlords are investing heavily in cloud or Wi-Fi systems and keeping an eye out for tech developments that could keep them ahead of the game. For instance, the roll out of the National Broadband Network is set to bring greater internet speeds to many areas of the country. Preparing for installation differs for each location, but guidance is available on the NBN website.

The cool factor

While certain industries (architecture, design or tech) have traditionally relied on well designed spaces to present a certain image to prospective clients, this trend is becoming more widespread. More and more companies are enthusiastic about unusual features in office spaces, inspired by Silicon Valley’s Facebook and Google megaplexes. Employee perks, such as games rooms, communal break areas, funky kitchens, bars, on-site restaurants and gyms all figure heavily on lists about the ‘best places to work’.

Some companies see office space as a revenue-generating investment in its own right. By investing in cool or different office layouts and features they hope for a return on investment in staff satisfaction, productivity and ultimately their bottom line. 

Flexible workspaces

Another trend is the demand for flexible – or more elastic – work spaces. Startups, especially in the tech or finance sphere, need spaces that can expand or shrink with their business needs. This has led to the rise of coworking spaces and hot desking, as well as business accelerators and innovative high-growth spaces, which can command premium rents. Activity-based working is another buzzword and involves providing employees with a choice of settings for a variety of workplace activities. Proponents of this model argue that its flexibility enhances costs and output efficiencies for companies who use it.

First impressions

Some companies see their office as a crucial part of their overall marketing strategy and will pay a premium for space in a landmark building. Buildings like these are likely to impress clients, add to staff satisfaction and morale, creating a buzz around the workplace. 

Prospective tenants are also more likely to opt for premises with a complete set of modern amenities. Smart foyer cafes are almost a given in large CBD office buildings and typically serve as a handy overflow facility for client meetings, as well as a convenient spot for workers to grab a coffee or lunch. 

With more workers choosing to cycle to the office or visit the gym en-route, ‘end-of-trip’ facilities are being touted as the latest marketplace must-have. This new industry buzzword refers to the amenities required by workers at the end of their journey to the office; such as bike racks, lockers and showers.

And in the office market, size still matters, with high-rise buildings on the up – there are 31 high-rise projects underway in Melbourne alone, including what will be the city’s tallest building. And Sydney’s much-feted ANZ Tower caused a reshuffle of premium banking and law tenants when it opened recently, revitalising the mid-town area.

Strong fundamentals

Top of the list of considerations for companies choosing office space are usually the practical ones: presentation; amenities; proximity to clients; good transport links; ease of access and pricing. Getting the fundamentals right is crucial, but it can always be enhanced by incorporating some of the tips in this article.

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The team at Savills are experts in their respective fields, with extensive experience backed by 150 years of Savills industry knowledge. This makes us well placed to provide you with the most informed view of current trends as well as helpful guides and top tips across the commercial and residential property sectors.

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