
The rise of the tenant advocate
There’s been increased uptake of tenant advisory services in the post-lockdown era, particularly for A-grade and prime office stock, according to industry operators.
Property Council of Australia data to December 2022 reveals Sydney recorded its highest office occupancy figure since June 2021, while Melbourne’s occupancy rate jumped 12 per cent to reach its highest level since the start of the COVID-19 pandemic.
Sarah Hughes, national director of tenant advisory at Colliers, agrees that prime markets have been in demand.
“There’s this common misconception that most businesses are working largely from home, and as a result, there’s an abundance of available space,” she says. “This is not the case with good-quality premises, though.
“Businesses are attracted to buildings that provide a ‘flight to quality’ experience. They’re working to bring employees back to the office so they’re competing in this tight market.”
Hughes says paying for tenant advocacy is money well spent in tight financial times.
“Real estate is typically the second-largest expense for any business so it’s imperative to seek proper advice on your lease arrangements.”
Sadaf Mayar, JLL senior director of tenant representation, says she’s also seen tenant advocates becoming more popular.
“For example, our team alone in NSW represented 113 clients in 2022 and achieved client savings of over $93 million in total,” she says. “In the past, tenants may have used a broker who works on behalf of both an occupier and landlord by bringing them together.
“The Australian market has matured significantly and, as we enter a year of economic uncertainty, I’d strongly encourage occupiers to engage with a tenant representative to make the right leasing decisions, both for now and the future.”
Mayar says tenant advocates don’t simply find space and negotiate terms. They are strategic advisory partners engaged as much as two to three years before a lease end date.
“Our role specifically looks at identifying and mitigating the risks specific to the occupier,” she says. “Each business is different and, similarly, each industry is being impacted in different ways.
“A tenant rep brings in that industry insight and years of experience to really tailor a strategic approach when it comes to negotiating leases, relocating offices or looking for more flexible lease solutions plus off-market opportunities”.
Mayar says that two considerations have gained prominence for tenant lease selection since COVID-19 first hit – ESG (environmental, social and governance) factors and staff contentment.
“Since the pandemic, employee expectations and needs have changed,” she says. “We look at how to enhance the human experience via a workplace study to ensure we’re a step ahead when it comes to attracting and retaining staff in this war for talent, and the workplace strategy is fit for now and flexible to adapt to future needs.”
The rising importance of ESG is dictating organisations’ property and lease selections, Mayar says.
“We very much support our clients by understanding their sustainability strategy and advise how their current lease may affect their commitment towards the net zero race,” she says.
“Through our robust transactional process, we review properties that align with our clients’ sustainability targets and ensure our clients partner with landlords that are on the same pathway in terms of cutting down emissions and their ESG strategy.”
As well as assessing new space, Mayar says evaluating the viability of a lease renewal should also be part of the overall strategy.
“If the current premises have potential for a further term, then [they are] worth reviewing,” she says. “As part of our process, we ensure we keep the existing landlord engaged as there’s generally a long-standing relationship that we need to ensure we maintain on behalf of our clients.”
A process of comparing the lease renewal of the existing premises with new space is also valuable when leveraging negotiations in favour of the tenant, Mayar says.
“In most cases, occupiers will want to review a renewal as there’s existing infrastructure and fit-out they can capitalise on,” she says.
“Landlords are often offering comparable terms to a relocation for a lease renewal, so tenants can capitalise on cost-saving by spending a reduced amount to reimagine a workplace that better attracts and engages their talent.”