Seeking shelter from the storm

Seeking shelter from the storm

Jones Lang LaSalle has seen a distinct rise in the number of large corporates looking to secure long-term tenancies.

Mark Grant, National Director of Markets for Jones Lang LaSalle says, “We can see the signs of gridlocked office accommodation, particularly in Auckland, with the lack of new and available stock increasing the upward pressure on rental values. The recent work we have undertaken with clients such as BP, Aurecon, SunGard and IBM, who have all had requirements in excess of 2,000sqm, has demonstrated a well-defined trend for office occupiers acting now to secure long-term office space”.

Mark continues, “Commercial tenants are taking out long-leases as a way of protecting themselves from an inevitable increase in rents and effectually, seeking shelter from the storm.”

These companies are looking to insulate their occupancy costs, with minimal variable exposure on their property footprint. This also works well for landlords, with the long-term security of a blue chip tenant in their portfolio.

Low vacancy rates are putting pressure on tenants to kick into gear and start their search now for accommodation solutions. This is especially the case for tenants with large commitments as they need the longest lead times and are the least nimble in their property choices.

With occupier demand increasing, office supply static and vacancy tightening, we are seeing rents beginning to increase especially in the CBD. Jones Lang LaSalle’s forecasts suggest that these conditions likely to trigger an anticipated round of rental increases; which will push into prime stock in the first instance with secondary stock following suit through 2015.

Most recently, BP, who leased space for its new head office in the newly constructed five green-star rated building at 73 Remuera Rd in Newmarket. Matt Lamb, Associate Director of Office Leasing for Jones Lang LaSalle who facilitated this lease says “Requirements for quality, large scale office space are becoming harder to place, with occupiers who are prepared to act fast being best placed to take advantage of what is available and secure their long-term position, and thereby protect themselves from the upward pressure that is coming over the next period of time”.

Jones Lang LaSalle have recently found in excess of 10,000 sqm of space for a number of large corporate occupiers who are acting fast and bunkering down before the changing market conditions.

As economic conditions have stabilised and given impetus to improving confidence this is now resulting in a new round of leasing activity, with tenants looking to secure better quality premises. In addition, offering incentives to sign for a longer lease are now clearly improving the overall lease profile of prime buildings, fundamentally securing the value in the medium to long term.

Matt Lamb continues, “With the footprint of corporate occupiers growing as well as rents on the rise, a number of landlords are taking the reins and securing long leases. This strategy allows them to maximise their tenure until the investment value rises and allows them to secure their business for a period of low vacancy and rental increases.”

ENDS

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