Companies struggling to calculate how much office space they’ll need as staff slowly return to work are being offered a “rent to buy” option in what’s thought to be a first in Australian commercial real estate.
The developer of a new $23 million strata-titled office building in Melbourne’s west has launched a model for firms to lease suites for up to 12 months to see how their business settles in, with the option to buy later and deduct rent paid from the purchase price.
“I’ve been speaking to a lot of business owners and senior managers and invariably the topic of conversation turns to what they’re doing with their workforces returning and space,” said Cedar Woods COO Patrick Archer. “There’s still so much uncertainty.
“So I thought if we could give them some flexibility that would help when companies are trying to decide whether to move into new premises and work out how much space they’ll need if everything pans out the way they hope.”
The initiative has been launched for two sample suites in a seven-level, 6000-square-metre building in the 50-hectare Williams Landing Town Centre, part of a new masterplanned suburb a 20-minute drive from the Melbourne CBD. The 71 suites of around 160 square metres each – suitable for 10-15 employees – sell at around $800,000 or will rent at $50,000 a year.
If the experiment proves popular, it could become a template for commercial offices all around Australia.
“I’ve never come across this ‘rent to buy’ option before,” said Cushman & Wakefield national research director Tony Crabb. “It’s a bit of a novel idea. Most strata-titled property is either bought by owner-occupiers or bought by an investor and rented out.
“But at a time like this of such dramatic change, adversity seems to be the mother of invention, and that’s what this is. This notion of try before you buy is a good idea, and is a win-win. It means the landlord gets an income and a potential buyer gets to see how it works. If it does go well, it could be adopted elsewhere.”
The model has been known in the residential sector, with companies like Assemble providing apartments in Melbourne that people can lease for five years with the option to buy at the end of the period at a fixed price. It enables residents to see if the community suits them, and allows them to save for the possible purchase during their tenancy – or simply move out at the end instead.
But most believe it’s never been tried before in the commercial sphere.
“I’ve never come across it,” said Thomas Fredriksen, director of office leasing at ONYX Commercial Property, who previously worked in the same sector with Colliers International and Knight Frank. “In 14 years in commercial real estate, I’ve never heard of that.”
Mr Archer believes it could be a good way of navigating business indecision while confidence has still to completely return, especially since the City of Wyndham. in which Williams Landing falls. has the highest number of new business registrations in Victoria.
“There’s high demand for this area because it’s only 20 minutes to the CBD and has its own transport hub, freeway interchange and regional bus interchange,” said Mr Archer. “It also has its town centre, and residential – both completed and in development – that’ll eventually deliver 2400 dwellings. It’s got huge potential.”
Offices in Cedar Woods’ smaller, five-level, 5500-square-metre block of 47 offices, also on Overton Road, sold out before construction even started. Founding director of M&C Accountants Carmel Filippone was the first person to buy in.
“I’d been working from home, looking for a good location, and I came across this,” she said. “We can fit about 20 people in the office I bought so we’ll have plenty of room to grow, and it’s a beautiful new building with views of Melbourne CBD, Port Phillip Bay, The You Yangs to the west and Dandenong to the east.
“I’m very confident but it’s a great idea to give people the opportunity to move in and see what it’s like, especially when the rent you’re paying is then going towards the purchase price. It’s a bit like a vendor loan system. And if a big developer like Cedar Woods is doing it, you’d think it would be picked up by others too.”
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