Listed players winning battle for tenants

Office tenants are favouring properties owned by listed trusts and superannuation funds over private owners, as competition to fill vacant buildings along the terrace intensifies.

New data out from property analytics firm Y Research showed office buildings owned by ASX-listed trusts or superannuation funds successfully leased 9,128 square metres of office space in 2016, while at the same time, 7,819sqm of office space was vacated in privately-owned buildings.

Vacancy rates in buildings owned by listed trusts were also well below that of privately-owned buildings in 2016, Y Research said, at 21.5 per cent versus 26.3 per cent, respectively.

Y Research principal Damian Stone said the large balance sheets behind the listed funds allowed those landlords to reduce rents and provide significant incentives to secure tenants.

“In many cases, owners reduced tenants’ rent to comparative levels with competing properties and tenants re-committed to their existing tenancy,” Mr Stone said.

“For the tenants that moved from lower-grade CBD properties, West Peth or from suburban locations, the ability of listed owners to offer tenants longer rent free periods was the main driver of space take-up.

“For owners, aggressive incentives drove absorption and maintained asset values better than lower rents.”

Mr Stone said the only way for private landlords to level the playing field over the next 12 months would be to upgrade their buildings.

“Over 10 buildings in the Perth CBD upgraded their end of trip facilities over the past 12 months,” he said.

“Selected owners have introduced community events for buildings – weekly events such as yoga classes or bike mechanics combined with special events around Christmas and sporting events.

“Private owners can also benefit by directly approaching suitable tenants, CBD and suburban, that fit with their current tenants.”