Rethinking The Australian Office

Moving from average to superior building quality is associated with a 5% decline in a buildings’ vacancy and 7% increase

percentage increase on lower floors is greater than on higher floors, but also in terms of absolute value, ie the actual dollar increase on lower floors is greater than the absolute dollar increase on upper floors. The results also show that Grade-B buildings on average benefit more than Grade-A buildings from an investment in building quality. To some extent, this is in line with intuition. Higher floors should have more natural amenity value than lower floors: they would have better views, better natural lighting, etc. Meanwhile, by definition, Grade-A buildings should have more amenities than Grade-B buildings. As a result, the marginal impact of additional amenities would be less than an asset or location with fewer existing amenities, holding everything constant. This result does show that the positive impact on an investment in building quality is greatest on the areas of the building that can be the most difficult to lease.

in average net effective rents.

In short, investing in a building’s quality helps to strengthen a building’s weak points.

DECLINE IN VACANCY 5%

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