Office and other commercial rents vary considerably across capital cities and within cities, their metropolitan and regional areas. Ultimately, firms will need to consider a range of factors when locating an office including proximity to customers, facilities, transport & logistics and public transport.
Central Business Districts
The Central Business District (CBD) is the core business centre in all capital cities in Australia. CBD areas tend to be dominated by business services, finance & insurance while manufacturing, transport, postal and warehousing and wholesale & retail trade are primarily located in metropolitan areas.
CBD locations are well-serviced by radial public transport systems and offer a wide range of options ranging from low cost to premium options.
When using a building or premises for a business it must meet current legal requirements and federal and state laws. As such, when looking at prospective premises, it is advisable to seek out sites likely to have hosted businesses engaged in similar activities and thus are within the “Existing Approved Use”. It is also useful to take note of surrounding businesses and their opening hours. In general, planning law tends to zone comparable business activity together and existing business will often give you an idea of what sort of activities are permissible within a particular area.
Minimum commercial lease terms usually start at a minimum of three years with an average lease term of around five years, often with a matching period for an optional renewal (i.e. 3+3 or 5+5). It is common for annual rent increases of around 3-4% per annum or rent increases based on the Consumer Price Index (CPI).
Incentives may be negotiated on a case-by-case basis and may depend on levels of demand and vacancy rates, lease term, type of business, quality of tenant, amount of space, fitout requirements etc. Incentives ranging from 5-30% of net rental may be offered in the form of a rent abatement over the term or period of the lease, typically in the form of a number of months rent-free from the commencement.
The typical approximation of office space is around 10-15 sqm per person. This takes into account a modest reception, meeting room and utilities. This will increase if additional or larger boardrooms and facilities are required.
Initial Office Costs
There are a number of initial set up costs. These include:
- Bank guarantee for security over the space will be required. This is generally around six months rent for a three-year commitment. This may be reduced in some cases if the prospective tenant can demonstrate a solid financial position.
- Legal fees generally cost between $1,000 and $2,500.
- Insurances: Public Liability Insurance of at least A$20m is required. Business and general insurance is also typically required in the terms of most leases.
- Rents are typically paid monthly in advance. The first months rent will be due at the lease commencement.
When taking occupation of a building or office you may have to undergo a Development Assessment (DA) with the local government. This Development Assessment outlines how the site will be used based on the Building Code of Australia classifications. Depending on the outcomes of that assessment, it may be necessary to lodge a Development Application and seek consent from the local Council.
Companies may need to undertake an office fitout or make changes to an interior or exterior of a building, though these can be negotiated as part of an initial incentive deal. Further information on fitouts can be found in the Office Fitouts section. If upgrades, changes or development are required further consents may be required. It is advisable to gain an idea of all potential issues and costs of this prior to signing a lease.
The Australian property industry is a recognised world leader in environmental sustainability and the greening of buildings. The National Australian Built Environment Rating System (NABERS) is a national rating system that measures the environmental performance of Australian buildings, tenancies and homes. It evaluates a building energy efficiency, water usage, waste management and indoor environment quality and assigns a star rating from zero to six stars that represents its operational performance. A six-star rating indicates a market leading performance, with half the greenhouse gas emissions or water use of a five-star building.
Contracts & Tax
Legal and tax/financial advice should be sought prior to signing a lease contract. Common commercial property lease terms include:
- Term and Options – fixed lease term and option to extend.
- Rent reviews – terms for reviewing and the rate or amount of increase
- Sub-leasing and assignment rights
- Outgoings i.e. for common facilities & building expenses.
The Australian Tax Offices provides information on the tax implications of a property used in running a business.
A range of other options exist for establishing a business, these include:
Finding Commercial Property
There are a number of commercial property sites offering listings of available commercial property for sale and lease across Australia. They include offices, industrial and warehousing and retail. The main sites include:
- Commercial Real Estate www.commercialrealestate.com.au
- Real Commercial www.realcommercial.com.au
- Commercial View www.commercialview.com.au
These sites are also useful to find an agent. Agents are specifically knowledgeable about property in their respective market, can provide additional information and often have access to additional properties coming onto the market.