Commercial Property SPECIAL REPORT Photo: Stockphoto businessnews.com.au Commercial Property FEATURE Long-term focus drives office outlook Perth may have the highest office building vacancy rate nationally, but that’s done little to dampen the confidence of investors, developers and real estate agents. highlighted a part of business life often taken for granted: a physical presence. Workplace culture is a major part of that, according to Redhill Partners partner Oliver Mahé. “We believe the office of the future has to become a desti- nation with a purpose and will be designed with an increased Katie McDonald focus on collaboration, with [email protected] potentially more individu- 8-PAGE FEATURE al-style work completed from home,” Mr Mahé told Business ERTH’S latest lock- News. down provided a stark “The office of the future will P reminder to employers form an important part of an and office landlords of the organisation, as it will be the changing nature of work, where physical manifestation of the staff have the ability to operate company’s culture. remotely at short notice. “Rather than simply clocking CIRCUMSTANCE: One fifth of Perth CBD office stock is now considered vacant. Photo: Gabriel Oliveira But the shift to working from in and out, we believe it will home comes with caveats. become the place of employee Some people find it diffi- creativity and engagement.” last year, but that office leas- ing activity had picked up again, cult to remain motivated and Mr Mahé’s confidence in the The fact remains that offices and productive in a home environ- longevity of the office is backed with Redhill Partners com- ment, while others can’t juggle by Redhill Partners’ recent $67.8 the CBD will always remain the lifeblood pleting 5,000 square metres of work and family needs (such as million play for a CBD office, office leasing deals in the last children home from school in pushing the Singapore-based of our city centres, and drivers of quarter of 2020. lockdown). private investment company up “We are of the opinion productivity and innovation Many workers find the lack the ranks on the Business News that while the pendulum has of socialisation a major draw- Data & Insights list of commer- - Sandra Brewer swung to a desire to work back of WFH, with this lack of cial property owners, to make from home, it will swing back interaction potentially affect- the top 10 (see page 34). Another selling point was clean slate to get a first-mover in the medium term as all the ing staff morale. Redhill Partners’ recent the notion that Perth was at advantage in delivering a whole intangible benefits of having From an employers’ perspec- purchase, 899-927 Hay Street, the beginning of a rising com- building offering and office the employees together in one tive, the inability to monitor comprises a vacant 14-level modities cycle, which Mr Mahé fitout to the changing tenant place begins to become more staff is a frustration, despite office tower (previously known expected to increase local eco- requirements due to COVID-19. apparent,” he said. several studies showing an as Dynons Plaza and the former nomic activity and demand for “We believe that once the increase in worker productivity headquarters of Chevron), as A-grade offices. pandemic is contained and Leasing activity in some sectors. well as three heritage buildings. “We were [also] attracted to behind us, we will see compa- Perth businesses appear to The property industry is Vendor Stamford Hotels and the opportunity due to the nies begin to return to the office understand the benefits of banking on the downsides of Resorts rejected a $134 million significant discount to replace- and embrace a cultural change, being back in the office more remote working to overshadow offer for the property just over ment cost for a 10-year-old look for new features in office than most, with the CBD’s occu- the upsides in the long run. a decade ago. building, the location, and the buildings, and have refined pancy rate (the percentage of While the pandemic has Mr Mahé said buying at a fact that it is one of the largest requirements for their office staff working from the office as shown the office is part of cyclical low point in the Perth contiguous vacant spaces in the fitouts.” opposed to at home) at the end an asset class that’s certainly office market was one of the market,” he said. Mr Mahé said there had been of last year the highest of all not immune to the whims of factors underpinning the “Additionally, we liked that some initial decision paralysis major Australian capital cities economic events, it has also group’s latest acquisition. we were presented with a among prospective tenants (see graph). 30 | February 15, 2021 February 15, 2021 | 31 PB | February 15, 2021 February 15, 2021 | PB FEATURE Commercial Property FEATURE Long-term focus drives office outlook Perth may have the highest office Property Council of Australia CBD occupancy rates, all major Australian cities size requirements, speculative WA executive director Sandra fitouts, incentives, and a flight building vacancy rate nationally, Brewer said office market to quality were ongoing influ- demand had been an ongoing ences on office demand in the but that’s done little to dampen the challenge for Perth, with the Perth market. CBD having averaged a vacancy Centralisation, where firms confidence of investors, developers rate of 19.7 per cent since Janu- take advantage of CBD condi- ary 2016. tions and relocate from the city and real estate agents. “We know that COVID-19 fringes, was another recurring will have impacts on the way theme, he said. we work, especially when out- “If you want to attract staff highlighted a part of business breaks occur, but the pandemic back to the office, it has to be an life often taken for granted: a won’t last forever,” Ms Brewer environment that’s attractive,” physical presence. told Business News. Mr Postma told Business News. Workplace culture is a major “Business and government “Everyone’s hopeful the part of that, according to Redhill have a critical role to play in [latest] lockdown will only be a Partners partner Oliver Mahé. supporting the return to office short-term blip.” “We believe the office of the workplaces and helping more Source: JLL Research/PCA Mr Postma said enquiries and future has to become a desti- people come back to office inspections throughout Janu- nation with a purpose and will precincts. vacancy at 2 per cent is a good “I think all of us were brac- ary had been promising, driven be designed with an increased “The fact remains that offices sign, especially when you look ing ourselves as COVID hit largely by businesses operating Katie McDonald focus on collaboration, with and the CBD will always remain at what’s happening across the that we’d be in all sorts of trou- in the resources sector. [email protected] potentially more individu- the lifeblood of our city centres, Sydney and Melbourne markets ble, especially when the office Government workspace 8-PAGE FEATURE al-style work completed from and drivers of productivity and where sublease vacancy has vacancy rate is in double digits. requirements also have the home,” Mr Mahé told Business innovation.” more than doubled. “With shorter leases and potential to make big move- ERTH’S latest lock- News. One fifth of Perth CBD office “Our subleasing activity is smaller spaces … maybe that’s ments in the market, with down provided a stark “The office of the future will stock is now considered vacant, ridiculously low when you con- why our end of the market is Sheffield Property last week P reminder to employers form an important part of an with buildings deemed to be of sider what we’ve gone through happening.” securing 8,000sqm of A-grade and office landlords of the organisation, as it will be the B-grade quality reporting the in 2020, and reports that a lot Mr Hay said he had bro - office space for the Department changing nature of work, where physical manifestation of the highest vacancy (28.8 per cent), of people working from home kered several recent deals in of Communities at 130 Stirling staff have the ability to operate company’s culture. followed by C-grade (21.6 per cent). won’t want to come back to the East Perth and Northbridge, Street. remotely at short notice. “Rather than simply clocking CIRCUMSTANCE: One fifth of Perth CBD office stock is now considered vacant. Photo: Gabriel Oliveira Meanwhile, the office office; if that was the case, you including three-year terms for And earlier this year, the state But the shift to working from in and out, we believe it will vacancy rate in West Perth would see sublease vacancy sig- a digital marketing firm and a government revealed plans for home comes with caveats. become the place of employee has remained unchanged since nificantly going up.” dance studio, as well as a one- a new office building in West Some people find it diffi- creativity and engagement.” last year, but that office leas- Early data for January 2021 July 2020, sitting at 22.1 per cent, Tenants requesting short- year term for a migration firm. Perth to accommodate parlia- ing activity had picked up again, cult to remain motivated and Mr Mahé’s confidence in the The fact remains that offices and from the Property Council the precinct’s highest level of er-term leases and smaller He said a number of tenants mentary staff (see map).