D EC E M B E R 2 0 1 7
SYDNEY OFFICE UPDATE DESIGN AS AN INNOVATION SUPERPOWER
TO RENT OR TO BUY
IS BUYING BETTER THAN LEASING?
LOCAL HOTSPOT
SKITTLE LANE
OUR PEOPLE We began Ray White Commercial (Office Leasing) Sydney in 2001 to help owners and tenants find the right property for their business. We’ve built a team of professional real estate agents who put your interests at the centre of everything we do. As part of the Ray White Group, the largest real estate group in Australasia, we have the strength and scope of an international business, with the local knowledge needed to deliver premium results. Being owner-led, we have a personal commitment to your success. Our Sydney Office Leasing team has eight leasing agents working solely on the Sydney CBD office market. We specialise in: •
easing and sales of office L space in Sydney CBD
•
Lease assignment and subleasing of surplus premises for tenants
•
Sourcing office space for tenants
•
roperty Management of P strata offices
ANTHO NY HARR I S
JE RE M Y PIGGIN
Director in Charge 0409 319 060 aharris@raywhite.com
Director 0413 336 161 jpiggin@raywhite.com
AND RE W TE LE P I S
CHRI S TI AN M I NARD S
Director 0415 972 696 atelepis@raywhite.com
Director 0447 777 037 cminards@raywhite.com
NAO M I VI LAR
E LI ZABE TH BRAI THWAIT E
Property Executive 0431 209 888 nvilar@raywhite.com
Property Executive 0434 305 588 ebraithwaite @raywhite.com
AND RE W E DWARD S
NI CHO LAS Y EO H
Property Executive 0411 346 232 aedwards@raywhite.com
Property Analyst 0415 566 541 nyeoh@raywhite.com
NI AM H D ’ARCY
D E BO RAH O UYANG
Executive Assistant (02) 9249 3768 ncarcy@raywhite.com
Team Assistant 02 9262 3700 douyang@raywhite.com
(0 2 ) 9 2 4 9 3709
CONTENTS 02 Thought Leadership: Rent or Buy 04 HOT SPOT: Skittle Lane 05 Focus Listings 07 JHK Legal: Assigning Your Lease 08 Intermain: Set Yourself up for
Success
10 Investa: Sydney Office Market 12 Gensler: Design as an Innovation
Superpower
14 November Transactions 15 Recent Transactions 16 Tenant Rep Table 17 Find Your Perfect Space
KEY ECONOMIC DATA: Cash Rate: 1.5% Australian unemployment rate: 5.5% Vacancy rates for Sydney CBD: 5.9% Ray White Commercial Group total trading value Nov 2017: 283 million
A CURVE BALL Christmas has thrown us a curveball this year - the usual pre-Christmas rush by tenants to close out leasing deals before the 25th just hasn’t fired. In the past, it’s like Christmas adds fuel to deals that may have been languishing. Most agents and lessors who have been in the market for a few years can attest to times past when it gets to mid November and transactions that have been coasting suddenly get ignited and there’s a rush to get terms agreed, documents signed, bank guarantees issued and trades instructed before we break for the end of year holidays, with spirited negotiations firing right up until Christmas eve. 2017 has been different. And it’s been different for a few decent reasons. Tenant demand exhausted itself in the first three quarters of 2017 and the expected acceleration in the last quarter just hasn’t happened. Yes we’ve had huge rental growth and yes vacancy rates are historically low, but the lack of demand at end of year is a point of concern for how the market will respond in 2018. I suspect that the limited supply of stock, strong employment and investment will keep rents stable in 2018. We’re seeing incentives increase on some deals, but in
cases where office space is offered with quality fit outs and furniture, transactions are being done at low incentive levels and strong rents. Coworking trends continue to eat into office demand. Green Street Advisors issued a report in November 2017 stating there will be about 14,000 co-working locations worldwide by the end of this year, compared with 600 in 2010. Now that’s growth! This is an increasing challenge for lessors to compete with, but it can also be seen as a field of opportunity for creative thinkers. And now for some stats of our own. We’re pleased to report our leasing team concluded over 100 leasing deals for the 2017 calendar year. Our momentum has been a result of proactive canvassing, quality marketing, team energy and most importantly, sensational clients and quality properties. It makes it much easier to do our job when we get to work with such great people! So we thank you. To all our clients, customers and colleagues, we wish you and your family a Merry Christmas and a safe new year. Is there better place to work than Sydney City and I’d have to say, it’s getting better every year. All the best, A NT HO NY HA R R I S M: 0409 319 060
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THOUGHT LEADERSHIP
TO RENT OR TO BUY? THAT IS THE QUESTION. Over the last two years hundreds of tenants in Sydney’s CBD have been forced to vacate buildings marked for demolition for conversion from commercial to residential, as well as offices acquired in Sydney for the metro train line.
For many businesses that have been through this predicament, the security of buying an office has become a real consideration. There might be a location you need to be near to, such as law courts or a financial hub. You might have staff who value security and create their lives around their workplace - buying property to be close to work, choosing daycare centres and schools that are easy on the commute, even things as simple as joining a gym nearby or enjoying the ferry to work. Or your address on paper might be critical to your industry, such as an office on Martin Place or near Circular Quay. Whatever your driver, when making your decision to buy or lease, is buying better than leasing?
BENEFITS OF BUYING
PITFALLS OF BUYING
✓✓ You don’t need to answer to a landlord on lease terms, make goods and options
✕✕ Banks will usually require 20-30% equity to buy the property, or more if you’re buying in a superannuation fund
✓✓ The property will become one of your major business assets over time ✓✓
If there’s capital growth, you get this benefit
✓✓ As the property increases in value you can borrow against your equity in the premises ✓✓ You can claim depreciation of fixtures and fittings
✕✕ Banks usually want a personal guarantee, which can put assets such as your family home at risk ✕✕ You become sensitive to interest variations, as opposed to fixed rates in leases ✕✕ If the sales market falls, your investment falls as well
✓✓ You can use the asset as part of your superannuation scheme
✕✕ Having no landlord means you’re liable for expenses including rates and repairs
✓✓ Ability to add value to the office by improving fitout.
✕✕ If you have to relocate, selling the premises could be difficult
✓✓ Owning gives you a sense of security and stability
✕✕ Purchasing a property makes you liable for stamp duty when you buy and agents fee when you sell.
DNEY OFFICE UPDATE CASE STUDY: BUY VS LEASE Below is a hypothetical case studyS Ywe’ve prepared using
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today’s estimated rental and lease values for a whole floor at 23 Hunter Street, Sydney. 23 HUNTER STREET SYDNEY Purchase Fit out Area ( m2) Price to buy psm Total purchase price Interest rate ( assume) Interest cost PA ( Interest only loan) Interest cost PA expressed as a rate psm
Assume fitted 300 $13,000.00 $3,900,000.00 5.00% $195,000.00 $650.00
Lease Fit out Area ( m2) Gross cost to rent psm Total gross rent PA Fixed rent increases Outgoings ( stay static) Incentive
Assume outgoings ( stay static) psm
$150.00
Make good
Total cost psm
$800.00 psm
Total cost psm
Assume fitted 300 $800.00 $240,000.00 5.00% Assume fully gross lease Assume nil incentive as fully fitted Assume nil make good as trade off for nil incentive and existing fit out $800.00 psm
Interest paid over 5 years Year 1 2 3 4 5
Interest PA $195,000.00 $195,000.00 $195,000.00 $195,000.00 $195,000.00
Rent paid over 5 years Year 1 2 3 4 5
Rent PA $240,000.00 $252,000.00 $264,600.00 $277,830.00 $291,721.50
Total Interest paid Total outgoings paid Total interest and outgoings
$975,000.00 $180,000.00 $1,155,000.00
Total rent paid
$1,326,151.50
Add stamp duty on purchase at $3.9M
$150,000.00
Total cost over 5 years
$1,305,000.00
Increases 0.00% 5.00% 5.00% 5.00% 5.00%
Total cost over 5 years $1,326,151.50
NOTE: So using the above example the costs of ownership versus renting is very similar however this model assumes no capital growth If you assume capital growth at say 5% per annum the outcome goes in favour of the purchase scenario as noted below. Assume 5% per annum sales capital growth Sales value by year (assume 5% pa) Value Year 1 $3,900,000.00 Year 2 $4,095,000.00 Year 3 $4,299,750.00 Year 4 $4,514,737.50 Year 5 $4,740,474.38 Original purchase price Sale price at end of year 5 Capital growth over 5 years
$3,900,000.00 $4,740,474.38 $840,474.38
Stamp duty on purchase of $3.9 M Selling costs at 2% on sale price Total of these costs Total capital gain
$150,000.00 $94,809.49 $244,809.49 $595,664.89
Increase 0.00% 5.00% 5.00% 5.00% 5.00%
Your individual circumstances will have a heavy bearing on what works best for you, but for many successful investors the biggest driver is the timing of entering and exiting the market. If you decide it’s an option for you (even just an option), let our team know and we can put you on our radar. In any case, if you’re looking at changing your premise - to buy or to lease - we can talk you through the finer points of one scenario versus the other to help you make an informed choice. Disclaimer: This case study is hypothetical and in no way reflects a likely investment outcome. In some cases rounding has been used as well as estimates for outgoings and annual capital growth.
1 | SYDNEY OFFICE UPDATE
LOCAL HOTSPOT
SKITTLE LANE
It’s easy to make comparisons between Sydney and Melbourne’s laneway coffee culture, with the latter seemingly always coming out on top, but Skittle Lane, the newly opened cafe at 40 King Street has all the hallmarks of a quality Melbourne cafe, but overlaid with a Sydney ‘lightness’ that’s creating a stir.
40 King Street, Sydney Open weekdays 7am - 4pm skittlelane.com.au
Taking it’s name from the laneway next door, Skittle Lane are serving up some of the best coffee in the CBD - their own coffee blend, which is roasted offsite, and also a selection of single origins via espresso, filter and pour-over. The space is minimalist, cool and contemporary, making most of the incredible windows that were
originally on site, as well as clever tiered seating and black rimmed glazing. Coffee is the main event here, but there’s also a rotating selection of quick bites like toasties, pastries from Penny Fours, biscuits and breads from Sonoma.
SYDNEY OFFICE UPDATE | 5
FOCUS LISTINGS S UI T E 4 0 .0 1/19 MARTIN PLACE
Amazing high floor suite with existing fit out. Reception, large boardroom, 3 offices & 14 workstations.Amazing views of the Harbour Sub-lease to June 2018 Area: 265 m2. Price: $1246 psm pa gross Agent: Elizabeth Braithwaite 0434 305 588
L E VE L 2 3 / 9 CASTLEREAGH STREE T
Premium half floor sub lease with boardroom, Large kitchen & breakout area.6 Meeting rooms/ offices 18 Fully cabled workstations & room for more Natural light & amazing harbour views. Flexible lease terms Area: 290 m2. Price: $950 psm pa gross Agent: Elizabeth Braithwaite 0434 305 588
L E VE L 3 / 2 2 MARKET STREET
This location provides excellent natural light with prime fitted-out suite, 5 Offices and approx. 17 Workstations. Flexible lease term Area: 192.5m2. Price: $800 psm pa gross Agent: Christian Minards 0447 777 037 or Nicholas Yeoh 0415 566 541
L E VE L 4 / 8 6 LIVERPOOL STREET
Whole floor featuring polished concrete floors High ceilings, large full height glass windows. Self contained with shower, 2 toilets and own kitchen. Vacant from 1/3/18 Area: 153 m2. Price: $650 psm pa gross Agent: Naomi Vilar 0431 209 888
6 | SYDNEY OFFICE UPDATE
FOCUS LISTINGS PART L E VE L 20/321 KEN T STREET
Sub lease or assignment opportunity. Brand new high quality fit out and furniture in place and great light and views over Barangaroo. Vacant now and ready for immediate occupation Area: 671 m2. Price: $950 psm pa gross Agent: Naomi Vilar 0431 209 888
PART L E VE L 39/161 CASTLEREAG H S TRE E T
Virtually brand new high quality fitted out office with shared reception. Open plan area with workstations and 8 offices with the potential for a 9th from the secure storeroom. Term remaining until April 2021. Area: 320 m2. Price: $1100 psm pa gross Agent: Christian Minards 0447 777 037 or Nicholas Yeoh 0415 566 541
L E VE L 5 / 9 CASTLEREAGH STREET
Premium whole floor sub Lease to April 2020 with boardroom, Large kitchen & breakout area, your own Reception, 8 meeting rooms/offices and 44 Fully cabled workstations with natural light from 3 sides Area: 674m2. Price: $810 psm pa gross Agent: Elizabeth Braithwaite 0434 305 588 or Andrew Telepis 0415 972 696
L E VE L 1 1 / 61 YORK STREET
Fitted whole floor with a large private balcony partitioned with reception, meeting room, 2 offices 12 workstations with power and data. High quality & secured lobby with intercom access Area: 208.3m2. Price: $830 psm pa gross Agent: Anthony Harris 0409 319 060 or Jeremy Piggin 0413 583 338
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ASSIGNING YOUR COMMERCIAL LEASE BY JHK LEGAL I N PARTN ERS H IP W ITH R AY WHITE CO MME RC IA L
1. The proposed assignee intends to change how the shop is used; or 2. The proposed assignee has financial resources or retailing skills that are inferior to those of the current tenant. Tenants proposing to assign their lease obligations are usually still liable to the landlord for the duration of the lease in the event that the assignee breaches covenants of the assignment lease. It is also important for tenants to note that usually lease terms will require them to be in compliance with the terms of the lease prior to assignment.
Most lease agreements will contain a provision for both parties, whether be a tenant or a landlord to be able to assign their lease. Assignment of a lease can occur in different manners depending on whether you are a tenant or a landlord and depending upon the terms contained in your lease. In the event that there are clauses contained within the lease that prohibit assignment then it may not be possible for the lease to be assigned. Often leases will contain terms allowing the tenant to assign a lease only where written consent of the landlord has been granted and usually the landlord will still require the assigning tenant to remain liable under the lease if breached by any future tenant whom the lease has been assigned. As a tenant it is important to ensure a clause is inserted into the lease which highlights that a landlord won’t unreasonably withhold consent.
HOW TO OBTAIN CONSENT TO FROM YOUR LANDLORD TO ASSIGN YOUR LEASE Before approaching a Landlord for consent to assign a lease, there is some standard information required that most Landlords will request regarding the proposed tenant including financial viability of the proposed tenant, ownership information if a company tenant is proposed, reasons for assignment and details of any other lease interests of the proposed tenant and type of business conducted by the proposed tenant. For retail shop leases there are minimum standards and requirements for the assignment process and usually if the process is followed tenants are to be granted consent for assignment. Tenants should be aware that there are two main grounds for when a landlord can refuse consent for assignment of a retail shop lease:
WHEN A LANDLORD MAY HAVE TO ASSIGN Assignment for the Landlord, will predominantly occur in the course of the sale of the premises and/or sale of business located at the premises. This assignment is usually dealt with in the sale contract between the existing Landlord and the new Landlord. Usually a lease will provide automatic rights to a landlord for the assignment of a lease without the consent of the tenant. Our advice is that when entering into a lease, whether you are a tenant or landlord that you thoroughly review and obtain independent legal advice as to the provisions of your lease, including the important assignment provisions that may become relevant if you choose to sell the premises and/ or your business.
If you are a tenant or a landlord that requires any advice in relation to the preparation of your lease and/or advice in relation to the assignment of your lease, do not hesitate to contact us at JHK Legal. 02 8239 9600 or visit JHKlegal.com.au
Krispy Kreme offices in Sydney – cost engineered to achieve a sophisticated look on a limited budget. 8 | SYDNEY OFFICE UPDATE
SET YOURSELF UP FOR SUCCESS FIVE WAYS TO ENS U RE A GREAT OU TCOME FOR YO UR FI T-OU T PROJ EC T
BY ANDREW JOHNSON MANAGING DIRECTOR, INTERMAIN
Fitting-out an office is something most companies will do at least once. But with many complexities and moving parts involved, mis-steps can generate both financial and opportunity costs. At Intermain, we advise our clients of five ways they can prepare for their next project to get the very best outcomes for their business whilst ensuring on-time and on-budget delivery.
I N PARTN E R S H I P WI TH R AY WHI T E CO MMERCI A L
SYDNEY OFFICE UPDATE | 9
1. A GOOD BRIEF IS GOLD
3. GIVE YOURSELF ENOUGH TIME
A comprehensive brief is multilayered, and goes well beyond the square footage and workstations required. We guide our clients to think about their ambitions for the business so we can design and build a smart space that supports this. Some of our questions might include ‘what is the desired working culture at the company? What are the growth expectations? What is the company’s brand identity? How do staff interact? What functions does the office need to support?’
Allowing sufficient lead time gives you far more scope to identify opportunities and economies for the fit-out. Once a design brief is agreed, a typical project should allow around three weeks for procurement and a further six-week construction period. But before work can start, companies should ensure they have satisfied all landlord and council approvals, a process that can be extensive if a full Development Application (DA) is required, for instance if your office is located in a heritage building. A good delivery partner will manage this for you, helping you navigate the process and expediting the approvals.
Understanding these points means we can tailor a clever scheme that directly supports staff productivity and engagement, creates a space that people ‘want to be’, communicates the company’s brand identity, provides the right infrastructure and future-proofs the office for expansion.
2. FIT-OUT PROJECTS ARE COMPLEX WITH LOTS OF MOVING PARTS Timing is everything and a successful fit-out project balances the staging of works with the procurement of suitable materials and fittings. By working with a single, multi-skilled team who can manage design and sourcing of materials, through to construction and delivery, companies can de-risk their project significantly. And rather than juggling different contractors who may have competing agendas, this approach gives the client a single, accountable point of contact throughout the project and provides a seamless experience. A good delivery partner will also guide your material and furniture selections to ensure delivery timeframes are aligned with project milestone dates.
4. CLEVER DESIGN DELIVERS VALUE With the right design and clever selection of materials, a high-end finish can be achieved even on a limited budget.
COST-ENGINEERING A S C H E M E I S O N E WAY YOUR DELIVER PARTNER CAN ADD SIGNIFICANT VA LU E TO YO U R P ROJ EC T.
An example is the Krispy Kreme headquarters we recently completed in Sydney. To ensure we achieved the company’s vision for a stylish and engaging space that reinforced their brand ethos on a limited budget, we created visual focal points around the office using high-end joinery. With these features setting a sophisticated tone across the office, we then had the licence to use more cost-conscious materials elsewhere, bringing the project in on-budget.
5. SELECT A TRUSTED DELIVERY PARTNER It sounds obvious, but working with a trusted design and construction partner is key to de-risking your fitout project and ensuring a successful outcome. At Intermain, our definition of a good delivery partner is one who dedicates a quality and experienced team to the task. They will invest the time to fully understand your requirements and design a scheme that achieves your vision well into the future. They will communicate well throughout the project, will always be available to you and will keep you fully informed. They will also innovate to identify cost efficiencies, improved functionality or solve problems. Naturally, attention to detail and pride in their work sets a good provider apart, as does the project management skills to keep the works on track from both a budget and timing perspective.
Andrew Johnson is Managing Director of Intermain, an established multi-skilled commercial fitout company focussed on excellent customer service and high quality building standards across building refurbishment, design and construct for corporate offices, ‘make-goods’, retail and hospitality. Intermain work nationally from offices in Sydney, Melbourne and Brisbane and have one of the largest, state-of-the art joinery workshops in Australia.
VISIT INTERMAIN.COM.AU FOR MORE DETAILS.
A RT ICLE BY M I CH A EL CO O K , G RO U P E X ECUT I V E, I NV ESTA PRO PERT Y G RO UP
THE SYDNEY OFFICE MARKET AND THE UBS EVIDENCE LAB.
A short time ago UBS produced an interesting article drawing from its Evidence Lab titled “Forecasting Sydney and Melbourne Rents”. The general thrust of the piece was that the market may be overestimating the strength of the current office cycle and the implications for the Australian REITs with Office exposure. The Evidence Lab approach is admirable in its process, conducting surveys of industry participants, mining the internet, collecting observable data to build a model taking into consideration interest rates, employment growth, vacancy rates, GDP statistics and other measurable factors to try and predict office rentals, rental growth rates and incentives. Investa adopts a similar approach and some industry veterans (yours truly included), have been analysing the data in a similar fashion for the last 30 years. Whenever anyone says, “but this time it’s different,” the usual response is either tacit skepticism or straight out disbelief (manifested by such colloquial requests to share what they are smoking or to provide a urine sample). But this time it really is different. There are at least 10 reasons why the UBS Evidence Lab may be under estimating the scale of what is happening in Sydney.
Each of these factors was relatively unforeseen and very difficult to predict or measure, which is precisely why this time it is different. These are not forecastable, cyclical factors. In a post GFC environment, few owners or developers were prepared to launch into producing more office stock, so when Lend Lease launched Barangaroo, there were two clear effects, firstly, with nearly 300,000 of fringe office space entering the market, other developers were discouraged from competing (not like in Melbourne where, if one goes, they all go).
Barangaroo scared off competing supply which allowed an opportunity for the post GFC office market to recover (1). But not fully – post GFC, the demand for office space has been anemic. Lend Lease has had to pull forward demand from 2019/20 to fill towers which were completed in 2015/16.
SYDNEY OFFICE UPDATE | 11
Both AMP and Lend Lease will experience the full legacy of this when they develop their towers on Circular Quay in 2020/21. Ok, so Barangaroo was a negative, but that’s the only one. Very few of us in the property industry noticed the trend in the US of technology firms growing up, graduating from their suburban play pens with slides and ball pools to adult office buildings. In the USA, Amazon, Google, Salesforce and myriad others are crowding the major cities (2). In Sydney, the likes of Linked In, Apple, Salesforce, Amazon, Expedia and others have eschew Macquarie Park for Martin Place (and nearby). No-one predicted the “recentralisation” of the IT industry, or the explosive growth of the likes of Atlassian (3). In addition, no-one would have predicted the emergence of a new industry, Fintech, and its need to be with or adjacent to its customer base, the big four banks. Both the Technology industry and the Banks have exhibited a voracious appetite for office space to feed “Fintech”. (4)
The residential development boom across both Melbourne and Sydney has led to traditional suburban office locations such as Chatswood, St Leonards, Strathfield, Epping, Ashfield, Burwood (Camberwell, Hawthorn, Box Hill) being over-run by residential development. With residential sales rates on a “per square metre” basis greatly exceeding that which can be achieved for office, no developer in their right mind would develop office ahead of residential. This furthered the phenomena of recentralisation of office space users, which shows no sign of stopping given the fundamentals of on going residential demand (5).
At the same time all this was bouncing around in the background, the NSW government and to a lesser extent, the Victorian government have embarked upon a once in a generation infrastructure program. In NSW this measures more than $75 billion, and counting (6). The Sydney Light Rail Project and the Metro alone are accounting for a jobs growth boom that would have the resources states (Qld, WA and SA) drooling. No models would have forecast that 11 A & B grade buildings in Sydney would be demolished disgorging 60,000 square metres of office space users on to our streets (7). Especially during a period where every conceivable development site (except a couple) was being re-zoned to fulfil the exploding demand for hotel rooms, serviced apartments and CBD residential living (8). Across Sydney since 2014, more than 60 sites have been approved for Hotel or Serviced Apartment development. And this has only compounded the problem for UBS’ Evidence Lab. Whereas old office buildings were traditionally knocked down and replaced with new office buildings, now they are being replaced with expensive higher yielding apartments (9). This has forced development land prices to soar to new levels, making the feasibility for office development even more challenging, unless of course, we can justify higher rents (10). But higher development land prices are just the beginning. The cost of development is going to be further impacted post 2018 when the infrastructure projects move into the development phase (11). Try getting a demolition contractor, a scaffolder or a form worker in 2019/20/21! We saw in Perth what happened to construction prices when the mining boom created a vacuum of resources in the construction industry.
Construction price escalation rates could rival rental growth! And we haven’t even mentioned the We Work phenomena and the rise of “3rd spaces” (12) or the death of the home office. All factors few of us let alone the UBS Evidence Lab could predict.
During the depths of the GFC, we couldn’t see an end to the destruction of the real estate industry, but it recovered. Conversely, during a boom, it is difficult to predict when it will end. Sydney’s explosive 20% per annum rental growth over the last 2 years may not be sustainable, but calling an end to the cycle in 2019 may be a little premature. In calendar year 2018, there is only one small building being completed. In 2019, another single building. Then in 2020, another single building, then its just a few refurbished projects before Lend Lease completes its latest project in Circular Quay. This constrained supply cycle will persist until the completion of the Metro Over Station Developments in 2023/24, which means rental growth is likely to continue through the early 2020’s. And the more prolonged this rental cycle persists, the greater the pressure on incentives. Ordinarily, I would sit up and take notice of a UBS forecast, especially one using the rigour of the Evidence Lab, but this is not an ordinary cycle, this time it really is different.
MICHAEL COOK Group Executive Investa Property Group October 25, 2017
12 | SYDNEY OFFICE UPDATE
BY GENSLER
AN OVERUSED WORD AND AN UNDEREXPLORED PRACTICE.
SO, WHAT DESIGN SUPER The word innovation continues to get thrown around. For the POWERS ARE NEEDED FOR past decade at least, innovation has been a catch-all for that INNOVATION? special sauce that gets companies to act first on the newest technologies and market opportunities. It’s considered the key to yet another buzzword: disruption. With the rules of startup culture in mind, businesses from big pharma to evolving finance have treated innovation as something they should aspire to. We find that when organisations particularly tell us they want to innovate, they usually mean they want design to be the hero by transforming their space. At first, they believe that their teams of experts will find a magic bullet inside war rooms, creative labs and collaboration spaces. But therein lies the gap: the expectation that innovation only comes about as a result of the right kind of space when there is so much more to it.
INNOVATION FRENZY— EVERYBODY’S DOING IT. There’s been an uptick in the building of accelerators, incubators, innovation labs—all kinds of terms for spaces that are in support of innovation. We’ve been calling it an innovation frenzy.
There are precedents, wacky ideas and benchmarks about how to foster innovation in the workplace, but it’s important to look at what you’re trying to accomplish and what’s the best means to get you there. Just as an example, we gathered some research about things that people are doing to spark innovation in the workplace and collected examples of over 60 unique physical interventions. We mapped them across a spectrum from the most direct, like an Einstein Room that screams “you will be a genius when you are in here,” to more indirect interventions, like bringing in views of nature so employees will have fresher thinking.
OUR BIGGEST FINDING WAS THAT IT IS NOT JUST THE PHYSICAL DIMENSION THAT LEADS TO SUCCESS, BUT (OBVIOUSLY) THE PEOPLE, CULTURE AND PROCESSES THAT TAKE PLACE THERE.
SUPER POWER #1: PLAY A DISTINCT PART Let’s flip the switch just a little and stop talking about innovation and start talking about InnovaTORS, because ultimately, we’re designing for people. Starting with people and their unique skills and perspectives, we’ve found that high-performing teams tasked with innovation find success not only through intense focus, but through commitment to each other. When a person plays a distinct part, they inhabit and perform a set of behaviours that come most naturally to them. When acting as part of an innovation team, technical skill sets matter, but alignment of diverse social skills, workstyle preferences and conversation style is crucial. Teams need design to help them articulate where they fit in the innovation process, and where they can best contribute. Wearing the right hat can make for a successful outcome because the right talent is in the right place.
SYDNEY OFFICE UPDATE | 13
When Gensler designed Airbnb’s headquarters in San Francisco, the company’s founders insisted that the design team embed itself in the company for a period of four months. As Kursty Groves and Oliver Marlow describe in their book, “Spaces for Innovation – The Design and Science of Inspiring Environments,” the design team, tasked with creating “the most creative place on earth,” internalised the role of “Airbnb employee” in order to better understand the organisation’s creative process and then deliver a space designed to facilitate the needs of the collective.
Space exists to prompt this culture—it aids in triggering the right kind of conversation and the right rituals. When they act as part of a balanced equation, the results can be beautiful. What can be ugly is when you’ve got the space, but you totally are missing the mark on culture. Think of cafes sitting empty due to the stigmas attached to collaborative workstyles amongst a “work at your desk” crowd. Innovation is about creating a unique subculture—it’s a combination of events, methods, words, emails, music and food.
people as it does in the brain, but is perceived through and influenced by the unique modes of thought and experience of heterogeneous groups and teams. Together, they recombine initial ideas, iteratively. That’s what we call social creativity, and it’s deeply dependent on diversity of thought, background and skill set. Getting that process to come about requires a bit of alchemy—casual collisions arising out of entropy are not necessarily as productive as everyone leads us to believe. It’s about facilitating those interactions among the right team in order to build a collective point of view, create solidarity and allow for new ideas to emerge through a brand new process.
BE A HERO Innovation is not a slide in someone’s office, a part of someone’s title or a top-down initiative. INNOVATION IS EXPERIENTIAL, CULTURAL, AND MOST OF ALL, IT TAKES PRACTICE.
SUPER POWER #2: MAKE CULTURE, NOT JUST SPACE
SUPER POWER #3: PRACTICE SOCIAL CREATIVITY
Let’s think beyond spaces like messy zones, inspiration rooms or brainstorm annexes. It’s not the tables and chairs that bring about innovation—it’s what you do with them that counts. Designing a home for innovation also means creating the right culture. Organisational tools facilitate innovation behaviours: like “no meeting zones” or “five minute max rooms” or ensuring “equal seats at the table.” It’s also about developing language, rituals and adding a layer of myth-making that allows people to collaborate in a space that is separate enough from their day-to-day. In their book, “Whiplash: How to Survive Our Faster Future,” MIT Media Lab director Joi Ito and coauthor Jeff Howe put it this way: “think mythology, not mission.”
Designers have this amazing ability to create clarity and order to solve problems through creative thinking. At the individual level, what is called creativity comes about when ideas ricochet up and down the neocortex, connecting ideas and sensory messages until inspiration strikes and those signals shoot up to the frontal lobe, the place where the cognitive functions of narrative and planning take control of all those neural connections. Innovation comes from the creative process of recombinatory iteration—the act of combining things over and over again in different ways. On an organisational level, innovation functions based on social creativity— where the information flows across
These go hand in hand. It can’t be mandated, but it can be undertaken with intention, rigor, discipline, and importantly, design. While it’s okay for there to be lightness around the topic (the goal is to stop talking, start doing, get sh*t done and have some fun) it should always lead into uncharted territory. Innovation heroes embarking on this journey should be prepared for things to get a little dangerous, but armed with the right design tools, they can have the super powers to unlock new value in actionable and impactful ways. This article originally appeared on GenslerOnWork. To learn more, visit www.gensleron.com/work All Images © Gensler
14 | SYDNEY OFFICE UPDATE
NOVEMBER TRANSACTIONS GROUND FLOOR, 100 HARRIS STREET The amazing refurbishment at 100 Harris Street Pyrmont is now the Home to Domain.com’s new head office. IPMG have sub leased over 1,600 m2 from Domain . IPMG is the largest independent marketing group in the southern hemisphere. Agent Andrew Telepis Area 1,626m2 Rental $600 psm pa gross
SUITE 902, 50 MARGARET STREET Staff Solutions Australia have taken 10 paces out of 60 Margaret Street and moved next door to 50 Margaret Street with an existing fit out. Staff Solutions Australia are experts in Recruiting, Visa consulting and Education consulting Agents Naomi Vilar & Jeremy Piggin Area 140m2 Rental $1,000 psm pa gross
SUITE 80I, 66 CLARENCE STREET With now more than 1 million customers, including Ray White, XERO are growing their Sydney offices, relocating from 309 George Street into the north side of level 8 / 66 Clarence Street featuring a terrific outdoor balcony. Agents Anthony Harris & Christian Minards Area 527m2 Rental $850 psm pa gross
SUITE 901, 66 CLARENCE STREET O’Brien Palmer Insolvency & Business Recovery are taking a fresh approach with a new fit out leasing 423m2 on level 9 / 66 Clarence Street. OBP relocated from 9 Hunter Street. OBP used Nathan Blue as a tenant advocate.. Agents Anthony Harris & Christian Minards Area 423m2 Rental $850 psm pa gross
SYDNEY OFFICE UPDATE | 15
RECENT TRANSACTIONS
Ad d re s s
a re a (Sq m)
Leas e St art Date
Term ( Years)
Gro s s Re nt (Ps m)
Le sse e
Level 5 27 Maquarie Place
228
September
5
$895
Stewart Partners
801 - 66 Clarence Street
527.2
November
3
$850
Xero
Mezz Gallery - 27 Macquarie Place
179
October
5
$775
Pac Partners
Suite 7.04/66 King Street
76
November
0.5
$500
Currie & Brown
Level 7/104 Bathurst
214
October
3
$467.29
The Hunger Project
901, 66 Clarence Street
402.6
April
6
$850
OBrien Palmer
GF 100 Harris Street Pyrmont
1625
June
2
$600
IPMG
4/28 O’Connell Street
481.9
August
5
$995
Auto Pilot
6.02/45 Clarence Street
291
August
4
$781.25
Global Data Australia
904/189 Kent Street
250.7
December
5
$650
Hitech Group Australia
Level 10, 61 York Street
208.1
October
4
$998
SKMC Australia Pty Ltd
S601, 111 Elizabeth Street
367.6
October
10
$1229
Clarence Professional
12.01, 2 Chifley Square
92.3
July
2
$1230
Boston Operations
10/28 O’Connell Street
483.3
August
4
$970
Aquasia
Part level 3, 63 York Street
208
August
3
$721
Assured Legal Solutions
3.17/428 George Street
100
June
3
$607
Jenny Craig
1203/50 Margaret Street
122.7
April
2
$750
CodeHouse
16 | SYDNEY OFFICE UPDATE
TENANT REP BRIEF TABLE Te na nt Na m e
Are a ( Sq m)
Ti mi n g
Lo c at i o n
Co mment s
Tactix Human System Group
200 - 250
Q1 2018
CBD
Fitted, High End data/IT Connectivity
Liquid Capital Australia
350 - 450
Nov 2018
CBD
5 year lease + option
Chambers Russell Lawyers
500 - 800
July 2018
CBD
5 year term
Johnstone Haines & Fergusson
250 - 350
Aug 2018
CBD
5 year lease + option
Wrays Pty Ltd
400 - 500
April 2018
CBD/ North
5+5 term, room for expansion, 1 car space
Etihad Airways
350 - 450
May 2018
CBD/The Rocks
Grass Valley
500 - 700
immediate
Sydney GPO
Sanger
200 - 350
Feb 2018
CBD/North Sydney
Project Analysis
350
May 2018
Chatswood
5 years, Creative/Heritage Space 5 year term, 15 car spaces, 24/7 access Ideally 2 years, will consider 3 year term, 5 years + 5 years
SRK Consulting
260
Sept 2018
CBD
5 year term + 5 year option
CT Connections
200
Aug 2018
North Sydney
5 year term
Design Studio
400
March 2018
Sydney CBD or Fringe
2 year term,
Property NSW
420 - 420
Q1 2018
Fringe - Surry Hills,
5 years + 5 year option
COTA
100-170
immediate
Sydney CBD or Fringe
2-3 year term, 8-10 workstations, large boardroom, kitchen area
Thermoxix
200 - 300
Nov 2017
CBD/Fringe
3 year term, open space for 50 people, break out area, signage
Cellmid
150 - 200
April 2018
CBD/Fringe
Short term with options
SYDNEY OFFICE UPDATE | 17
L E VE L 1 4 /7 7 KING ST
FIND YOUR PERFECT SPACE L EV EL 2 /62 PI T T ST
CENTRAL LOCATIONS CITY VIEWS L E VE L 1 4 /1 M A RKE T S T
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OUROFFICES 48
O F F ICES AC R OS S AU ST R AL I A, N EW Z EA L AN D, C H I N A AN D HON G KO N G
F R O M H U M B LE B EGINNINGS IN 1902 IN T H E S M A LL Q U E E NS L A ND CO U NT R Y TOWN O F C R OW S NE S T, R AY WH IT E H A S NOW B ECO M E A H O U S E H O LD NA M E CO NNEC T E D TO T H E P R O P E R T Y A ND R E A L E S TAT E IND U S T R Y, H O M E LOA NS A ND INS U R A NC E, WIT H A N A NNUA L T U R NOV E R IN E XC E S S O F $40 B ILLIO N.
NT O FF IC E
23
Q LD O FF IC E S
WA OFFICE
SA O F F IC E
I N T E RNAT I O NAL O F F ICES I N: N E W ZEAL AND H ONG KONG CH INA
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NS W O FF IC E S
Ray White was awarded the Family Business Award at the 2015 EY Entrepreneur Of The Year Awards. Recognising three generations of business, the EY Awards are considered the most prestigious business awards globally. In 2016, Ray White won the Major Network of the Year Award at the Real Estate Business Award at the Real Estate Business Awards, the real estate industry’s premier awards, open to every professional and real estate group in the industry.
4
V IC O FF IC E S
O FFI C E
CON TACT
O F F IC E
CO NTAC T
Ray White Advisory
(02) 9262 3700
Ray White Commercial (Parramatta)
(02) 92493725
Ray White Business Sales (Sydney CBD)
(1800) 858 696
Ray White Commercial (Pine Rivers)
(07) 3889 8000
Ray White Commercial (Adelaide Asset Management)
(08) 7228 5600
Ray White Commercial (Queensland)
(07) 3231 2211
Ray White Commercial (Bayside)
(07) 3245 7199
Ray White Commercial (Runaway Bay)
(07) 5528 8878
Ray White Commercial (Cairns)
(07) 4044 1111
Ray White Commercial (South Sydney)
(02) 9101 8000
Ray White Commercial (Caloundra)
(07) 5491 4600
Ray White Commercial (Southport)
(07) 5552 6388
Ray White Commercial (Christchurch)
(03) 379 4120
Ray White Commercial (Springwood)
(07) 3290 5383
Ray White Commercial (Coomera)
(07) 5573 1077
Ray White Commercial (Tauranga)
(07) 928 0000
Ray White Commercial (Eastern Suburbs)
(02) 9362 9000
Ray White Commercial (Toowoomba)
(07) 4613 1455
Ray White Commercial (GC South)
(07) 5535 0500
Ray White Commercial (Townsville)
(07) 4726 7888
Ray White Commercial (Gladstone)
(07) 4972 3288
Ray White Commercial (TradeCoast)
(07) 3899 5888
Ray White Commercial (Glen Waverley)
(03) 9574 9555
Ray White Commercial (Vic-Nunawading)
(03) 9955 0055
Ray White Commercial (Gold Coast)
(07) 5555 8600
Ray White Commercial (WA)
(08) 6253 5222
Ray White Commercial (Inner West)
(02) 9810 3422
Ray White Guangzhou: China
23761088
Ray White Commercial (Ipswich)
(07) 3282 9655
Ray White Hotels Australia (NSW)
(02) 8016 3810
Ray White Commercial (Newcastle)
(02) 4974 3011
Ray White Hotels Australia (QLD)
(07) 3046 4300
Ray White Commercial (Noosa & Sunshine Coast North)
(07) 5474 7600
Ray White Industrial (Gold Coast)
(07) 5555 8600
Ray White Commercial (North Coast Central)
1300 25 50 75
Ray White Industrial (M1 North)
(07) 3807 0001
Ray White Commercial (NSW Greater Sydney South)
02) 9099 1128
Ray White Industrial (Milton)
(07) 3331 5444
Ray White Commercial (NSW)
(02) 9262 3700
Ray White Projects (NSW)
02 9262 3700
Ray White Commercial (NSW-Sydney City Fringe)
(02) 9660 1717
Ray White Retail (Sydney)
(02) 9249 3753
Ray White Commercial (NT)
(08) 8943 3500
Ray White Special Projects (Queensland)
(07) 3231 2241
Ray White Commercial (Oakleigh)
(03) 9568 2000
Ray White Tsim Sha Tsui: Hong Kong
23761088
Ray White Commercial (Office Leasing - Sydney)
(02) 9249 3709
SYDNEY OFFICE UPDATE | 66
Award winning interior design and decoration for commercial, hospitality and residential projects across Australia
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