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Commercial property: A balancing act for landlords and tenants

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Landlords and bosses need to figure out what works and what doesn’t

Company owners and managers considering new office premises need to carefully balance their employees’ wants and needs to ensure both satisfaction and productivity.

And with office vacancy rates still at 11% and asking rental growth declining, landlords need to evaluate whether what they are offering is in line with what tenants are looking for.

A lot of weighing up needs to be done by both groups.

For companies, factors like proximity to public transport can be crucial, whereas others, such as easy access to shopping centres, might not always be in a company’s best interests.

Employees’ workplace satisfaction has seen more emphasis on being close to amenities like shops and gyms so that they can work out or buy their groceries during lunch or after work. But while these benefits are attractive to employees, they could be detrimental to businesses.

It is a “double-edged sword”, says Erwin Rode of Rode & Associates.

“On the one hand, employees like strolling over to a shopping centre during lunchtime but, on the other, I have met employers who complain that employees ‘disappear’ during office hours.”

Sufficient parking is a necessity for employees and visitors to premises. Picture: Michael Jarmoluk

While this issue is debatable, certain facilities are must-haves when looking for new work premises, Rode says. With the growing congestion of cities, office location close to public transport is becoming “crucial”.

Furthermore, company decision-makers should also consider where their employees live before deciding to move. “The availability of sufficient parking is a necessity – for both employees and visitors.” Ease of access is definitely a consideration for company owners, agrees Chad Shapiro, senior commercial broker at CTS Property Services.

But he cautions they should not forget employee morale. In terms of physical attributes, he notes that clients are looking for larger premises with wider amenities than high-density office space. Business owners who are consolidating opt for office space that is flexible with regard to company growth and downsize, thereby keeping their leases in place without moving around and increasing spending.

“Tenants should look for office premises that are ‘plug and play’, keeping their fit-out cost to a minimum. This means they can keep their commitment in the form of lease terms down, as well as minimise their liability with their landlords.

“A commercial landlord will be more willing to be flexible and allow companies to walk away from their contractual commitment if their spends are lower.” In these difficult times, Rode advises landlords to judge the affordability of the rent they demand.

“Flexibility in negotiations is becoming more important – also in the case of housing rent. On reversion to market levels, many a landlord will have to accept that their rental streams will decline.” Landlords are encouraged to get creative in their bids to attract tenants, says Tyson Properties’ Craig Woods.

Old-style generic offices spaces just do not cut it any more. “You need to wow them with creative, trendy spaces and creative and modern leases with more flexibility and options.” But this is easier said than done, he accepts, as landlords are always trying to mitigate risk.

For tenants, Woods advises: “Push your landlords to get a better deal. They are desperate to secure decent leases with good covenants, so will be forced to work out a creative deal.”

Many options are available at present, so tenants should relook at their current lease parameters and find out if they are getting the best possible deal.


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