3 tips for navigating the Sydney office lease market

Market conditions in Sydney have become very challenging for office tenants over the past twelve months as a result of low unemployment, strong demand (particularly in the tech sector) and diminishing stock (due to withdrawals).

A large number of older, secondary grade, office buildings are being demolished to make way for residential and hotel conversions, new premium grade office towers and major infrastructure projects (example; The Sydney Metro Project). As a result, there is significantly less space available (reduced vacancy) causing rents to rise and incentives to scale back.

With several more buildings expected to be redeveloped or demolished in the coming 12 months and with no new office buildings (net supply) expected until 2019+, conditions are set to become even more challenging – particularly for tenants seeking cost effective office space.

My colleague Sarah Hughes and I have assisted more than twenty tenants affected by demolition and withdrawals in the CBD this year. While market conditions have become challenging there are still good deals to be found for savvy tenants. 

We’ve included below our top 3 tips for navigating the Sydney office lease market:  

1)     Define your brief: there are lots of things to consider, so work out exactly what you need first and prioritise a wish list and plan for all aspects of the move. By having a clearly defined brief you will not waste time looking at unsuitable properties.

Some of our clients have found they actually need far less space than they first thought by considering different working styles and new technologies.

2)     Be prepared to act quickly: in the face of fierce competition, being able agree a deal quickly will mean you have a better chance of securing your preferred property.

By obtaining internal approvals concerning budget at the outset of the project and understanding the nuances of the leasing market, our clients have the confidence to make quick decisions and secure the best properties ahead of the competition.

3)     Market knowledge: knowing the market will help you identify undervalued property options and pockets of the market that represent better value at that particular time.

Some of our clients have found better value by considering prime grade properties, where incentives are still high, compared to the tightly held and fiercely competitive secondary grade market where incentives are lower. 

Can’t find what you are looking for? Due to the shortage of stock and intensified competition for good spaces, an increase in off-market deals is evident. Some properties are leased before they are even marketed and others lease within 24 hours of being listed. This places significantly greater importance on retaining Tenant Advisors with strong professional relationships to ensure all available stock can be accessed and the best outcome is achieved.

The landlord employs a skilled negotiator with expert market knowledge. Shouldn't you?

Is your building being demolished or acquired? Or do you need to relocate or renegotiate your existing lease? Get in touch.

This article was written by Sarah Hughes and Rowan Humphreys - Tenant Advisors with Colliers International in Sydney, Australia.

Tags: #CRE #CorporateRealEstate #TenantAdvisory #TenantRepresentation #CompulsoryAcquisition #Tech #Sydney