The office market adapts to new ways of working

OFFICE BUILDING UPGRADES ARE NEEDED FOR BUILDING OWNERS TO STAY COMPETITIVE IN THE COMMERCIAL RENTAL MARKET

With more companies offering hybrid working arrangements, Australia’s CBDs are adapting to a new way of working – impacting investment in new office buildings.

While demand for office space nationally has remained fairly stable in recent years, a vacancy rate of approximately 13.5% makes investment in new office buildings less attractive. In this environment, upgrades to existing office buildings and fit outs offer an alternative to property owners looking to maximise value from their holdings.

A-grade and premium office spaces remain in high demand as companies continue to encourage employees to come back to the office with improved workspaces, new technologies and engaging environments. Businesses are looking for better locations, more attractive fit-outs, a diverse mix of spaces and better end-of-trip facilities.

But higher vacancy rates can be seen in B-, C- and D-grade office buildings which are struggling to meet these market demands.

Upgrades and extensions to these existing buildings offer a cost-effective alternative to demolition and new builds, and can be completed in shorter time-frames, enabling property owners to maximise the buildings’ value and returns.

As examples of this interest in existing building refurbishments, Marchese Partners are working on two commercial upgrade projects on Flinders Street in Townsville, five projects in Sydney including a building at North Ryde and the Carla Zampatti Headquarters in Waterloo and several more projects in Melbourne and Adelaide.

While each upgrade project has its own challenges and requirements, we see common opportunities. With improved and modernised fit outs within office spaces, there is a need to upgrade common areas (lobbies, End of Trip Facilities, lifts and building services) to meet the tenants’ expectations.

The commercial tenancies upgrade project we are working on in Flinders Street in Townsville is innovative upgrade work to an existing building. A variety of unique external breakout spaces are being created, to offer flexibility and create an interesting and engaging office environment. These areas are designed to cater to different needs, providing zones for both activity and tranquillity, in line with the diverse work patterns of the staff.

Adaptive re-use and upgrading existing tenancy fit outs to meet tenant requirements and to give them a contemporary appearance has also recently become a widespread strategy. Most tenants are seeking fitted out space in addition to other incentives, but many landlords are stuck with existing fit outs which are not attractive or suitable to today’s tenants. Landlords need to re-position their outdated spaces to make them present as contemporary and attractive so to appeal to tenants in this competitive leasing environment. Adaptive re-use is a quicker and much more cost-efficient process resulting in high-quality, attractive designs for office users. This is something we have done a lot of and so are highly experienced in in this process.

Many older buildings can enhance their street presence by opening up the ground floor and improving the activation with hospitality spaces as well as formal and informal meeting areas, breakout zones and communal areas.

While investment in new office buildings remains subdued, the strong demand for premium and A-grade office space means that building upgrades and extensions are a viable option for property owners as the market adapts to a new way of working.

If you would like to discuss this article in more detail or discuss any opportunities you may have please contact our commercial leadership team.

Steve Zappia our CEO and Founding Director: szappia@marchesepartners.com

Juergen Weigl in our Brisbane office: jweigl@marchesepartners.com

Lynsey Maloy in our Sydney office: lmaloy@marchesepartners.com

Rulla Asmar in our Melbourne office: rasmar@marchesepartners.com

Scott Colegate in our Adelaide office: scolegate@marchesepartners.com