Challenges in the Sydney Office Leasing Market

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We are in what Tenant Advisors refer to as a ‘Lessor’s Market’. If you consider the simple economics of supply and demand and that Sydney is currently undergoing some major changes contributing to what we are calling a Tenant Crisis. The decrease in office vacancy, redevelopment in the city and  increase in property prices and Redevelopment of many buildings within the city are contributing to an increase of 30 – 40% in rent when renewing a lease (exercising an option) or entering into a new lease.

Some factors that are challenging our clients at the moment;

1. Office Vacancy

Office Vacancy, the term property professionals use to describe the amount of commercial space that is available in a particular market is tending towards 3% at present and this is having an adverse affect on rental costs. Naturally when space is scarce, prices increase and tenants are finding it hard to find the space they desire or stay in the space that they are accustomed.

2. Redevelopment

Buildings in Sydney are dropping like flies so to speak. No sooner do the tenants vacate, the hoarding is up an another mammoth building in commenced in its place. This is great long term but in the short term, these buildings soon to scrape our skies are still 2-3 years off completion in some instances.

3. Property Prices

With the general increase in both Residential and Commercial property across Sydney, so to have rents increased. Lessors are certain that their buildings are worth more and are taking advantage of low interest rates to undertake upgrades to increase their bottom line. Gross rents therefore need to increase to subsidise the upgrades and reflect a return on investment.

What to do in this current market if your lease is due to expire;

  1. Carefully consider exercising an option on a lease. You will most likely sign up to an uncertain market review which may not work in your favour.
  2. Don’t be afraid to shop around for a deal. There are deals to be had. Landlords are giving good incentives to new clients and a lot less to existing clients knowing that most businesses just want to stay put to avoid the hassle.
  3. Get an experienced tenant advisor on your side to guide you through the process. If looking for an office isn’t your speciality, leave it to a professional so you can get on with business.

For a free lease review or to talk about your upcoming lease renewal get in contact with us HERE.

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