sydney forum mid-tier buildings opportunity knocks · 2017-11-14 · opportunity knocks cbre...

SYDNEY FORUM MID-TIER

BUILDINGS OPPORTUNITY

KNOCKS

CBRE Advisory & Transaction Services – Occupier

Presented By:

© 2017 CBRE | CONFIDENTIAL & PROPRIETARY 2

CONTENTS / AGENDA

Mid-Tier Buildings

Australian Market Overview

Millennials

Occupier Survey

Wellness

Questions


ADVISORY & TRANSACTION SERVICES - OCCUPIERTenant representation experts help tenants identify and align strategic business, financial, and operational objectives with real estate requirements

Jag DhandwarAssociate Director – Business

DevelopmentA&T – Occupier, National

[email protected]

Mark SlaterSenior Director – Pacific Head

A&T Occupier, [email protected]

Tristan GannanDirector – State LeaderA&T – Occupier, NSW

[email protected]

57OPERATIVES IN AUSTRALIA

mailto:[email protected]



MID-TIER BUILDINGS


MID-TIER BUILDINGS

Mid-tier buildings are found in the capital city CBDs and fringe areas, suburban centres and some regional towns. In the CBD, they are often known for being located in ‘corridor’ areas – parts of the city that are considered ‘secondary’ zones to the main thoroughfare. They are often in the older parts of a CBD with many being some of the first high-rise offices built. In Sydney for example, this would include Chinatown, and the ‘western corridor’ –Clarence and York Streets.

Figure 1: Breakdown of Australian commercial office by grade by PCA grade, 2015.Source: PCA Office Market Report

Breakdown of Australian Commercial Office

by Grade

8%Premium

42%A-Grade30%

B-Grade

16%C-Grade

4%D-Grade


WHAT DOES A MID-TIER BUILDING LOOK LIKEMid-tier office buildings generally have the following characteristics

Smaller buildings, generally under 10,000m²

A diverse ownership profile (secondary mid-tier, private, family-owned, strata titled,

government, foreign)

Generally a lower level of energy efficiency than premium or A-Grade

buildings

Generally older, built before 2000

Older HVAC plant and lighting. HVAC is likely to be the original system (25+ years old) with zero

or minimal controls and lighting tends to be T8

magnetic ballastfluorescent tubes

A mixture of smaller offices, with mainly small and

medium enterprise (SME) tenants

Shorter lease terms than premium and A-Grade

assets

Less rent per square metre

Generally no on-site dedicated team for

property/facilities management

Other terms commonly used to describe this class

of buildings includes ‘secondary’ or

‘sub-prime’.

AUSTRALIAN MARKET

OVERVIEW


AUSTRALIAN CBD & OFFICE KEY MARKET INDICATORS & FORECAST DIRECTIONQ1, 2017

LegendV – VacancyPR – Prime Net Face Rent PY – Prime yield

Arrows indicate 2017 calendar year forecast

V –

V – 21.1%PR – $592

Perth CBD

V – 16.1%PR – $418

Adelaide CBD

V – 6.5%PR – $565

Melbourne CBD V – 11.4%

PR – $375

Canberra

V – 5.09%PR – $1,065

Sydney CBD

V – 15.7%PR – $628

Brisbane CBD

Source: CBRE Research


SYDNEY RENTSNet Effective Rental Growth


-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Prim

e N

et F

ace

Rent

($/s

qm)

Sydney CBD North Sydney Crows Nest St Leonards Chatswood Macquarie Park Parramatta

Forecast


LOCAL MARKET CONDITIONS & PREDICTIONS

Rent

Vacancy

Incentive

Current

Projected

Current

Projected

Current

Projected

Sydney CBD North Sydney

South Sydney

MILLENNIALS


AUSTRALIAN MILLENNIALS – WHO ARE THEY?

22-39

73%

74% 18%

54%

35%BASED ON THOSE AGED

HAVE A DEGREE OR STUDYING FOR ONE

ARE EMPLOYED

LIVE WITH THEIR PARENTS/FAMILY HOME

(Much lower than Asian Countries – 70%)

MARRIED OR LIVE WITH A PARTNER

(Much Higher than Asian Countries – 37%)

HAVE INCOME GREATER THAN $100,000Source: CBRE Research


WELLNESS FACILITIES ARE A DRAW CARD FOR AUSTRALIAN MILLENNIALSWhich, if any, of these facilities would have an influence on you when thinking about taking a new job?

45%Of millennials like their current office layout

PERCENTAGE OF RESPONENTS 0 10 20 30 40

Wellness/Relaxation Facilities

Sleeping/Rest Areas

Green Space in Building/Rooftop Gardens

Games Room

Childcare Centre

On-Site Convenience Store

Canteen

Dry Cleaning Service

Ability to Receive Shopping Deliveries

Coffee Bar

Bike Racks

Showers

WELLNESS/RELAXATION FACILITIES

Is the biggest influence on millennials when looking for a

job

SLEEPING/REST AREAS, GREEN SPACE, GAMES ROOM & CHILDCARE

CENTRESAre highly desired compared to

what’s currently provided

Desire

Currently ProvidedSource: CBRE Research


MILLENNIALSWHAT IS IMPORTANT TO THEM?Office design & layout is important, but working relationships & environment is more important


77%Good Employers

put a lot of thought into the

working environment

74%Working

relationships are one of the most

important aspects of work

72%Good design &

layout of an office has a positive impact on the staff that work

there

65%I consider myself lucky to have a

job at all

65%In the current job market, it’s very difficult to find a job that really

excites you

62%I would like to

have flexibility on where I work from

on a given day

61%It is important to

take some risks in your work life


OCCUPIER SURVEY


HOW WILL OCCUPIERS CHANGE THEIR STAFF SIZE AND NLABY 2018?

Overall, the workplace ratio is predicted to decrease by

5.5%

Number of Staff NLA

58%Stay the

Same

20%Decrease

22%Increase

34%Stay the

Same

9%Decrease

57%Increase

2016 2018 Change

Mean – Staff 336 362 +6.8%

Mean – NLA SQM 5,608 5,634 +0.5%

Avg SQM/perperson 16.5 15.6 -5.5%

More people in

less space!


Base: All respondents (n=100)


WHAT IS THE NEXT FRONTIER OF SERVICES DELIVERY TO CUSTOMERS OF OFFICE BUILDINGS?

As buildings increasingly

deliver flexible work solutions,

businesses will shift their focus to

wellness offerings

77%

Work Environment

Supporting flexible work practices

Floorplate flexibility / Felixible leasing plans

Shared facilities e.g. meetings rooms, co-working space

Environmentally friendly / sustainable buildings

74%

Health & Wellness

General health and wellness

Food provision / delivery

Gyms

Childcare

Green Spaces

72%

Tenant Services

Full service Concierge

Improved service delivery fro building managers / landlords

Shared business support services

Other tenant services

65%

Building Infrastructure

Greater technological capability

Internal environment e.g. air filtration, lighting

Parking

Source: CBRE ResearchBase: All respondents (n=100)


WHAT THE FUTURE HOLDS

2017

2020+

End of Trip Facilites

Proximity to Public Transport

Rent ConferencingFacilities

On-Site ChildcareFacilities

Concierge

Environmentally Friendly Building

On-Site Services (Medical, Dentist,

Hairdressing)

Wellness


PAIN POINTS / FRICTIONWhat are some of the constant pain points / friction that you and your clients experience

ON-GOING ENGAGEMENT

INDIRECT COSTSBUILDING SERVICES

PERFORMANCE

PREMISES UPGRADES

LIMITED “OUT OF CYCLE”

ENGAGEMENT


BUSINESS CHALLENGES IN THE NEW NORMAL

WELLNESS


WELLNESS IS RISING UP THE CORPORATE AGENDAHow are your clients viewing or assessing “wellness” aspects of their accommodation?

CBRE has identified FIVE TRENDS that are driving interest in Wellness in the workplace

1 2

3

4 5Technology is making it

easier for people to manage their health

Awareness of stress & mindfulness is growing

Employees are living longer

But they’re less healthy

Key skills are hard to find

$70bn:79%

80%Average life expectancy for both men and women has increased

by 2 years since 2005Worldwide obeisity has

nearly doubled since 1980

of employees say wellness programmes would be crucial

to attracting and keeping them over the next 10 years

of people say that balancing private and

professional commitments is a cause of stress

the size of the market for wearable health

management technology 2025 will be

Source: World Bank, 2016Source: World Health Organisation, 2016

Source: CoreNet Survey: Sustaining Talent Through Wellbeing in the

Workplace, 2014

Source: CoreNet Survey: Sustaining Talent Through Wellbeing in the

Workplace, 2014Source: IDTechEx


WELLNESS IS RISING UP THE CORPORATE AGENDAHow are your clients viewing or assessing “wellness” aspects of their accommodation?

74%

Of European Occupiers have a

Wellness Programme in Place

By 2040 the lines between home and work will have blurred. Medical treatment won’t be restricted to the clinic. And the workplace will offer responsive features such as advice and healthy dietary options. This will boost our health, performance and productivity

What will this mean for the future of Wellness in

the Workplace?

There is an opportunity for organisations to boost their competitiveness, attract talendand manage their employee costs by introducing wellness initiatives.

To achieve lasting successful wellness programmes, they should:

• Create a wellness strategy• Carefully consider workplace

design• Flex their programmes

according to local culture• Use a set of clear measures to

demonstrate return on investment

• Take a cross-organisational approach

How Should Organisations Respond?

RESEARCH:WELLNESS IN THE WORKPLACE

This new report from CBRE Global Workplace Solutions examines the growing wellness phenomenon, discusses the drivers behind it and makes recommendations on how organisations can respond.


“PEOPLE AND COST - A SIMULTANEOUS FOCUS”

The right open-plan/agile workplace = business success

Occupiers who have recently redesigned their workplace are more satisfied.

Tenants planning to move look for technology, indoor air quality, lift performance, floorplate efficiency and wellness.

But – buildings are not measuring up.

Workplace strategy evolution and portfolio optimisation are now top real estate priorities.

More people - less space.

Floorplate efficiency risen in importance.

Work-life blend the new frontier

Wellness a productivity strategy

Major organisations looking for improved technology,

wellness, shared workplace facilities and childcare for

employees.

CUSTOMEREXPERIENCE

Increased productivity

Employee Engagement

Cost optimisation

QUESTIONS?

CBRE © 2016 All Rights Reserved. All information included in this proposal pertaining to CBRE—including but not limited to its operations, employees, technology and clients—are proprietary and confidential, and are supplied with theunderstanding that they will be held in confidence and not disclosed to third parties without the prior written consent of CBRE. This letter/proposal is intended solely as a preliminary expression of general intentions and is to be used fordiscussion purposes only. The parties intend that neither shall have any contractual obligations to the other with respect to the matters referred herein unless and until a definitive agreement has been fully executed and delivered bythe parties. The parties agree that this letter/proposal is not intended to create any agreement or obligation by either party to negotiate a definitive lease/purchase and sale agreement and imposes no duty whatsoever on eitherparty to continue negotiations, including without limitation any obligation to negotiate in good faith or in any way other than at arm’s length. Prior to delivery of a definitive executed agreement, and without any liability to the otherparty, either party may (1) propose different terms from those summarized herein, (2) enter into negotiations with other parties and/or (3) unilaterally terminate all negotiations with the other party hereto. CBRE and the CBRE logo areservice marks of CBRE, Inc. and/or its affiliated or related companies in the United States and other countries. All other marks displayed on this document are the property of their respective owners.

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sydney forum mid-tier buildings opportunity knocks · 2017-11-14 · opportunity knocks cbre...

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