What not to lose sight of when considering your occupancy strategy.

Given the current climate of the Brisbane office leasing market, tenants are encouraged to review their current lease obligations and actively seek out reductions in their total occupancy cost. With commercial opportunities and deal structure front of mind, here are five important property and workplace considerations that tenants often forget;

Future Lease Strategy

With high vacancy levels still driving tenant-friendly deal structures, tenants are compelled to focus on commercial metrics and reduce their total occupancy costs. Tenants and their advisors should be focused on extracting every cent out of a prospective deal and deliver a financial win to the business.

One benefit of the current conditions, is the opportunity for tenants to “upgrade” their premises – your company may consider premises’ that would have otherwise been unaffordable. Ask yourself the following questions:

• What will the market conditions be like at the end of your initial term?
• Could your company afford another lease-term with significantly reduced rental abatement?
• What affect (if any) would downgrading the quality of your office premises have on company’s image, and further, your company’s ability to attract and retain staff?

It’s important for tenants to lock in option periods with fixed reviews – to ensure any significant changes in the leasing market don’t affect your future occupancy strategy!

Landlord Relationship

Throughout the accommodation brief and shortlisting process, it’s easy for tenants to assess buildings purely on their physical attributes and commercial opportunity.

Many tenants overlook assessing the appropriacy of their prospective Landlord and/or Building Manager. Consider the following:

• What are the differences between institutional and private Landlords?
• How regular and comprehensive has the Landlords’ communication been throughout the negotiation period?
• Does the Landlord place value on a long-term relationship with their tenants?
• Can the landlord provide flexibility in deal-structure to support growth or change to your company in the future?
• Does the Landlord have other property holdings and/or the ability to house you elsewhere within their portfolio?

It’s important to acknowledge that a Landlords approach to negotiations may be less “accommodating” than their day to day management of the building. It’s important to focus on a Landlord’s commercial capacity, and willingness to “partner” with your company over the term of the lease.

Building Presentation

The current market conditions are allowing significant “savings” across all asset classes, meaning tenants may consider one, or a combination of the following:

• Upgrading quality of premises and maintaining occupancy costs
• Maintaining quality of premises and reducing occupancy costs
• A reduced quality of premises and significantly reducing occupancy costs

When focusing on commercial outcomes tenants may forget to ask the question – Is this building representative of our brand’s place in the market?

There are many contributing factors relating to how a building presents to the market, your clients and your competitors. Consider the following:

• Building design, age, quality and Nabers rating
• Location
• Street presence – how does the building present to passing foot-traffic?
• Lobby – this is often your client’s first impression of your company
• Common areas/bathrooms/lift wells – is this uniform throughout, and in-line with the remainder of the building’s presentation?
• Attached and surrounding amenity
• Tenancy mix

Remember, this will be your company’s home for the duration of your lease – does the brand of the building complement the brand of your organisation?

Floor Plate Geometry

When establishing your workplace strategy and designing your new workplace – it is imperative to consider the size and shape of the buildings floor-plate and what effect this may have on your office lay-out and occupancy efficiency.

Consider:

• What is the size and shape of the buildings floor plate?
  - Will your company fit on one floor?
  - If your company was split over several floors would this impact day-to-day operations?
• Is the building “Centre Core” or “Side Core”?
  - The buildings “core” houses elevators, stairs, bathrooms, and mechanical/electrical/communications services.
  - Does this affect your ability to deliver a fit-out that suits your workplace strategy?
• Core to perimeter distance?
  - What are the dimensions of the space you intend to occupy?
  - How will this affect your fit-out design, and ultimately workplace operations?

Natural light

Don’t forget natural light! It’s a significant contributor to the look and feel of tenancy as well as the health and well-being of your employees.

It’s important to be aware that the best commercial deals on offer, may not provide an optimal floor-to-ceiling-light which will limit the penetration of natural light into the centre of the floor.

Whether you find yourself in a tenant or landlord friendly market, these five workplace considerations are essential factors in determining your occupancy strategy.

However, it’s also important to have your workplace strategy defined, and your design requirements known before beginning any lease negotiations or beginning the search for a new location. In the absence of a workplace needs analysis or Master Plan, you could be limiting your company’s options and adding unnecessary costs to your bottom line.

We recommend you firstly analyse and envision a workplace solution that meets your current and future needs rather than designing a workplace into a suboptimal building.

For more information or help with your lease strategy and negotiations please don’t hesitate to contact PCG – we are an independent service provider with 30 years’ experience.

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