BIG BUSINESS TO EVACUATE CBDS

Written on the 28 June 2011

BIG BUSINESS TO EVACUATE CBDS

LARGE businesses will come under increasing pressure in the next five years to consider alternate office locations outside of the major CBD’s, according to new market analysis by CB Richard Ellis (CBRE).

CBRE’s review forecasts that office rents in Australian CBD’s will rise anywhere between 12 per cent and 24 per cent over the next three to five years as vacancy rates continue to fall.

In tandem, the availability of space with appropriate green credentials and sufficiently large floorpates will also reduce.

CBRE executive director of global research and consulting Kevin Stanley, says these factors combined would push large business to consider moving to the fringe of CBD’s or to split operations between a CBD head office while relocating other functions to city fringe locations.

Rents will be one of the compelling factors, with CBRE’s research highlighting that comparable gross rents in the fringe areas immediately adjacent to CBD’s are on average 32 per cent lower than comparable space in the centre of the city.

“Looking back in history the gap between CBD rents and the fringe markets never closes, although it may vary depending on the cycle,” says Stanley.

“With CBD rents forecast to rise, we expect this gap to be maintained or increase in the next three to five years, although the cost of building may also punch up rents for new buildings in fringe markets.”

CBRE regional director of office services James Patterson, says the analysis showed that the biggest saving nationally could be made in Sydney, where the typical gap between indicative gross rents was as much as 43 per cent between the core precinct of the CBD and the areas around Pyrmont/Ultimo.

He expects the gap to be maintained as rents in both areas were likely to rise in the next three to five years.

“On a national basis, some of the markets with older and smaller office stock which have suffered higher vacancy rates recently are those with the widest gap between CBD and city fringe rents,” says Patterson.

Communicate with vendors urges minister

To avoid a continuing spate of ‘for lease’ signs being propped up around the city, Queensland Small Business Minister Jan Jarratt, advises tenants to open up the lines of communication with their landlords.

Smaller retailers are closing their doors, unable to make rents as the ‘consumer strike’ continues and a drop in tourism spend is impacting on SMEs.

“It’s an issue that is not particular to the Gold Coast. There’s a similar issue in the Whitsunday in my electorate,” says Jarratt.

“It’s an issue that’s been brought on by a booming economy through the GFC and the disasters to become quite flat. There are two sides to every story. The owners of those buildings are often hooked into repayment schedules and they have their own commitments that they have to meet.

“On the other hand, the operator that is renting that space is struggling to meet the contract payments at the moment. It’s a real issue and I think the best way to solve it, is as a local issue through the chambers of commerce. What I’ve also seen working successfully in other places is getting the owners and the operators together to sit down and really talk through the issue.”


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