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Jones Lang LaSalle has released a thought leading whitepaper entitled 8 steps to maximising your return as an office landlord in a rising market.
With occupier demand increasing, supply static and vacancy tightening, we are seeing rents beginning to increase. At the same time, investor demand is also strong which is driving yields down to reach what we believe will eventually be all time lows. Sarah Dominey, Research Analyst for Jones Lang LaSalle says, "As the market moves through the next two to three years, 'once in a cycle' opportunities are available to building owners which will enable significant value uplift."
The whitepaper separates the strategies into value-add and management initiatives and aims to provide advice for both big and small budgets. The strategies have the aim of maximising the quality or perception of quality of buildings for both potential occupiers and investors as we enter a period of extreme competitiveness.
Value-add recommendations include innovative marketing solutions for example, speculative fitouts to cater for those with difficulties imagining potential office set up. In addition, there are two issues affecting real estate which are not going away: seismic sustainability and sustainability.
Tyrell Snelling, National Director in the Project and Development Services at Jones Lang LaSalle highlights "We have a number of ways to maximise return and minimise costs at the moment, especially when looking at incorporating green characteristics in buildings. Government grants for approved suppliers can halve the time for a return on investment and with a clear demand being shown from occupiers for this type of building, it's a no brainer". Taking on risks on those buildings which need capital investment for refurbishment and upgrades could release supply into the market at a time of tightening supply and carry big rewards for those willing to take the risk especially when combined with the forecast market improvements.
The whitepaper also highlights the importance of landlord reputation and some quick and easy tenant management wins to improve this for example landscaping.
With a greater number of tenant movements being recorded and evidence showing that landlords and agents alike are tempting tenants away from their existing space, Ria Hayward, Director of Commercial Property and Asset Management advises "Inaction could result in your tenant's being tempted to break leases and move elsewhere which will have a detrimental effect on your building's value. Don't wait the traditional 18 months before lease expiry to approach your tenants, pick up the phone now and get in there before someone else does". Offering incentives to sign for a longer lease could improve the overall lease profile of your building, fundamentally securing the value of your building in the medium to long term.
In addition to managing tenants, managing suppliers in a competitive market can result in not only better prices but perhaps more importantly, a higher quality of service.
As well as proactive strategies, the report also highlights the importance of seeking professional and specialist advisors. Utilising professional bodies such as The NZ Property Institute, building relationships or gaining testimonials can protect from poor advice which has the potential to waste time and money or have more devastating knock on consequences.