March Edition: Q4 Market Update, Lease Audit Toolkit & A Guide To Real Estate Jargon
Welcome to the first edition of Tenant CS's Monthly Roundup for 2023, where we share company news, articles you may have missed and helpful tips for commercial tenants.
Let’s get started!
Q4 Australian Office Market Update
Take a read of our latest CBD office leasing snapshots through a unique tenant-centric lens:
Here's a quick wrap up of the current state of play for each city:
Sydney
???? Sydney CBD's vacancy rate has jumped from 11.5% in Q3 to 12.2% in Q4 and may continue to rise this year despite Agent reports remaining positive.
???? High incentives averaging between 30-39% offset year-on-year increases in Gross Face rents
???? Sydney CBD’s sublease availability as a percentage of total stock is now sitting at 2.5% (approx. 130,000 sqm), driven primarily by Salesforce (9,914sqm), Westpac (7,497sqm), Lendlease (6,765sqm), NTT Group (7,449sqm) and IAG (5,648sqm).
Melbourne
???? Melbourne CBD's overall vacancy rate continues its upward trend, climbing from 15% in Q3 2023 to 16.5% in Q4 2023. This is primarily due to the addition of approximately 63,000 sqm of space with 500 Bourke St and 300 Flinders St openings.
???? Landlords are attempting to maintain their property values with high face rents. However, they are simultaneously increasing incentives despite the decline in returns, with Premium and A-Grade now sitting 43%+ and B-Grade at 44%.
???? Sublease availability as a percentage of total stock has increased from 2.2% in Q3 to 2.9% in Q4 (148,110 sqm), primarily driven by two listings totalling 57,000 sqm.?However, this figure is not a true reflection of total sublease availability, with more landlord agents masking the reduced asking rent of sublease space by offering "direct" leases on already leased space.?
Brisbane
???? Brisbane's overall CBD vacancy rate increased slightly over the quarter, from 11.6% to 11.7%, down from 14% in Q4 2022 y-o-y. This comes from increased demand for Prime office space and the withdrawal of Christie Centre (320 Adelaide St, 13,000 sqm) for refurbishment.
???? Given limited supply and strong demand, Gross Face and Effective Rents have increased Q-o-Q. Though incentives remain elevated to encourage tenant relocations, they have seen slight decreases Q-o-Q, currently averaging 40% for prime space and 44% for secondary space.?
???? Sublease space in Brisbane remains the lowest in the country, dropping from 0.5% to 0.3%. This is due to strong leasing activity and the city's limited exposure to financial and tech companies, the main drivers of subleasing nationwide.?
Adelaide
???? The overall vacancy rate in the Adelaide CBD has increased to 19.3% off the back of an unprecedented volume of new stock (85,000 sqm) hitting the market, including Festival Plaza (40,000 sqm), which opened in Q4. It's now at its highest level since 1995.
???? Adelaide's Net Face rents rose over the last quarter, now at $485 psqm for prime grade and $320 psqm for secondary. This has mainly been driven by increased supply and backfill availability. Prime and Secondary incentives ended the period at 35.3% and 41.5%, respectively.
???? Adelaide's sublease availability remains relatively steady at 0.4% of total stock, well below its previous peak in 2020/21.
Perth
???? Perth's CBD’s official vacancy rate is currently being reported at 14.9%. However, some reports estimate the actual figure to be hovering at around 15.2% following PCA’s boundary changes.
???? Prime and Secondary Net face rents increased over the past quarter, sitting at $684 psqm and $461 psqm, respectively. High incentives of between 46%-53% (depending on the grade, location and building/landlord vacancy profiles) offset increases in face rents.
???? Compared to other cities, Perth's commercial sublease vacancy is negligible at 0.3% (circa 6,000 sqm) of total stock. This is due to strong occupier demand - the highest in the country - and the city's trend towards office expansion.
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Canberra
???? Dubbed Australia’s most resilient office market, Canberra’s total vacancy rate has since dipped to as low as 5.5% (Q1 2022) but recently jumped back up to 8.3% following an unprecedented level of new supply (103,814 sqm) in 2022.
???? In Canberra, quality office space is in high demand but limited. For this reason, Prime face rents in the Civic increased over the past year, currently reported at an average of $539 sqm Gross. Secondary grade Civic face rents also saw a marginal increase, now hovering at $425 sqm Gross.
???? Prime and secondary face incentives in the Civic also crept up over the last quarter but remain at an all-time high for Canberra at 26.4% and 29.2%, respectively. Non-Civic incentives for Prime and Secondary stock also increased over the quarter, ending at 25.4% and 26.1%, respectively.
Read our full market update here: https://www.tenantcs.com/blog/australian-leasing-market-snapshot
Commercial Real Estate Terminology: A Handy Guide For Tenants
The commercial real estate landscape can be daunting, especially if you're new to the scene. It’s littered with jargon that can leave even the savviest of individuals scratching their heads.
Here's a handy guide to help you break down common jargon: https://lnkd.in/gvevZvVA
Lease audit toolkit: Tips for every stage of your commercial lease
Whether you're a seasoned business owner or a budding entrepreneur, the journey of leasing a commercial space is significant.
Read our guide to help you conduct a quick health check at crucial lease intervals to avoid unwelcome surprises and potential pitfalls.
Full article: https://lnkd.in/gyi9tSCV
Welcome Elliott Clarke
Introducing Elliott, who recently joined the Sydney crew as a Senior Consultant, specialising in unlocking tenant savings within Sydney's commercial real estate market.
He started in agency, before managing the ANZ portfolio for one of Australia's largest group-fitness franchises; negotiating leases in metropolitan and regional areas of every Australian state, plus across the pond in New Zealand.
Elliott considers himself an avid (albeit unskilled) snowboarder, will watch any sport played with an egg-shaped ball and has a keen interest in Japanese country and culture.?
You can learn more about Elliott here:?https://www.tenantcs.com/our-team/elliott-clarke
Take advantage of the market in 2024!
Even in a?tenant's market, many businesses still negotiate poor leases because they:
At Tenant CS, we're here to ensure tenants get the best deal possible. On average, we improve tenant savings by 1.8x compared to tenants who negotiate themselves (even in a soft market).
Get in touch with our team to learn how to take advantage of the current market conditions:
International Liaison (opinions are my own)
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