Is it really possible to pay a little and get a lot?

December 2016 marks the 4th anniversary since the wheels began to come off the Perth CBD office market. Many will think that it was much later, some as much as 2 years later but they’re wrong.

BHP moved into their new building and left vacant floors across the CBD in June 2012, commodity prices dropped through the floor around September 2012, and enquiry levels for office space from new market entrants evaporated. The conventional lease market continued for a while as many companies assumed it was a blip, and most of Western Australia thought the boom would last forever.

I have long described the serviced office market as the barometer of any economy. When a market improves we get enquiries from market entrants wanting to test the market, when a market is performing well there are many projects and regional office requirements that need to provide quality accommodation on flexible terms, and when a market is deteriorating the serviced office market feels the pain first. Unlike a more rigid conventional lease, our flexible agreements mean that we are an easy overhead to lose in tough times.

So, back to the last quarter of 2012……

By the end of the year two of my competitors expanded their footprint in Perth because…...who knows? To be frank, they were not close enough to the market and they got it wrong. They acquired space at the top of the market after demand had already begun to decline. So how did they react? With a good old fashioned price war. A war that nobody wins.

Prices in the serviced office market halved overnight as they began to realise their mistake and fought for early occupancy. The problem is that the people on the ground were so junior that they didn’t understand what they were doing to the market; they simply followed instructions from Sydney or Hong Kong. The local sales teams did not understand that they were selling their facilities for less than they were paying to provide them. More importantly they didn’t understand that they were conditioning the consumer into believing that the facilities and services we provide were worth less than the cost of providing them.

Once the consumer is conditioned into believing that unsustainable pricing is sustainable, the remaining competitors have to adjust their pricing to compete and from that point on repairing or resetting the market to an equitable and sustainable level is an uphill battle.

So when you are faced with a market that expects a lot for very little what do you do?

Most of my competitors had two hidden weapons to help them fight in the price war – stealth charging and auto-rollover clauses – the two things that will cost you so much more than any discount you have managed to negotiate. And that is why they will do anything to get you into their space and then use their terms and conditions to keep you there. But to be clear; SMALL PRINT IS NOT A CLIENT RETENTION STRATEGY!

Unlike my competitors I have vehemently protected Liberty’s values and refused to recoup the discounts we have been forced to provide on offices through excessive and divisive on-charging for additional services. Our reputation and integrity are worth more than a quick buck and our client retention strategy has been entirely to do what we say we are going to do and for there to be no surprises in your invoice.

So how have we survived?

Our clients have the ability to vote with their feet, but they haven’t. We have managed to maintain a relatively stable occupancy in a very volatile market through keeping our clients happy. We have been in excess of 90% occupancy for the entire 2016 calendar year and we look forward to WOW'ing our clients for many years to come.