Rethinking The Australian Office

IN THE MIDST OF THE BIGGEST STRUCTURAL CHANGE IN LABOUR MARKETS THIS CENTURY, OFFICE OWNERS MUST MAKE STRATEGIC DECISIONS AS TO HOW BEST POSITION THEIR ASSETS.

While data shows that tenant demand is skewed towards higher-quality properties, landlords have limited options. They can’t physically relocate their buildings to a more central location or build more transport connectivity around them. The main lever that landlords can pull is investing in upgrading the quality of their assets. But following a sharp climb in construction costs and tight financing conditions, is the return on this investment worth it for landlords?

This report quantifies the effects of an upgrade in building quality on its financial performance by analysing a dataset of 813 non-strata office buildings across the Sydney and Melbourne CBDs. After controlling for several factors including location, grade and amenity value amongst others, Cushman & Wakefield Research finds that increasing a building’s within-grade quality from standard to above average corresponds to a 5% decline in vacancy and a 7% increase in net effective rents.

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