Home Property Australia New criteria determining the price office tenants are willing to pay

New criteria determining the price office tenants are willing to pay

  • December 13, 2022
  • by Property Australia

Sarah Hughes, National Director, Tenant Advisory & Occupier Services, Colliers

While office space remains relevant, with Colliers reporting a nearly 45 per cent increase in occupier enquiry levels across all office markets for Q3 2022, compared to the same time in 2019, the price tenants pay is now driven by different criteria, according to Sarah Hughes, National Director, Tenant Advisory & Occupier Services, Colliers.

“We are now seeing tenants place a growing focus on other measures outside of the traditional norm, for example, the cost impact (whether positive or negative) of a building’s ability to help the tenant meet their environmental, social and governance (ESG) commitments,” she said.

“This is part of a shift redefining the value of office space for enhanced employee experience and value alignment, which also incorporates an increasing emphasis on diversity elements, including gender neutral bathrooms and multi-purpose rooms for prayer and breastfeeding, in addition to recreational areas and residential/hotel style fit-outs.

“The office is now much more than a tool to facilitate work – it is now a place you go to undertake tasks that you cannot complete from your home (office) whilst enabling collaboration and connection and providing a sense of belonging that ultimately fosters a positive culture, in an era of varied working styles.”

According to Cameron Williams, National Director of Office Leasing at Colliers, even large corporations known for being at the forefront of flexible/hybrid employee work arrangements are investing in new office space to strengthen their employee value offer.

“Deloitte’s upcoming move to AMP’s Quay Quarter Tower (QQT) in Sydney and Dexus’ new Waterfront Precinct Brisbane Development in 2027, will see the firm’s New South Wales and Queensland employees occupy brand new buildings with the latest ESG features,” Mr Williams said.

“Deloitte’s new Sydney headquarters is more efficient, with physical connection via staircase between the firm’s floors.

“Pre-commitment to become the anchor tenant at the Waterfront Precinct Brisbane Development provides Deloitte a great opportunity for a premier location and will provide significantly more space than their current Riverside Centre premises.”

According to Tina McCreery, Chief Human Resources Officer, Deloitte Australia, the firm’s new Sydney and Brisbane offices will support the firm’s commitment to providing its people with premium workspaces, access to cutting-edge technology, and dynamic design to make collaborating in-person and virtually even easier.

According to Adam Howard, National Director, Project Leaders, Colliers, industries such as tech and media, which are known for promoting dynamic working styles that can impact office headcount, are also upgrading their offices, undertaking fit-outs since 2019 to attract and retain employees.

“In recent years we have facilitated fit-outs for major tech and media offices, ranging from 11,000 to 22,000 square metres, which include features such as an additional five to 10 percent dedicated recreational/dual purpose space and an increasing number of smaller rooms for digital meetings,” Mr Howard said.

“Tech giants are also moving towards a residential/hotel feel, with a heightened focus on vibrant and biophilic design underpinning inviting spaces for people to feel comfortable in their workspace.”

Both Mr Howard and Ms Hughes have noticed a significant surge in demand across all businesses to upgrade to A Grade and Prime Grade office space.

“The cost of relocation means that occupiers are preferring spaces that are already fitted-out with modern and inlusive features that optimise the employee experience, whilst providing flexible workspaces with dual purposes, catering for fluctuating headcount,” Ms Hughes said.

“Some of our clients even have ESG goals tied to their bonuses which really reinforces how seriously businesses are treating their commitments, and a general shift in business drivers as it relates to real estate decisions.”