Tenant advisors achieve more than cost savings for commercial businesses

Colliers International explores benefits of engaging tenant advisory services to assist in renewing, renegotiating and exploring new lease opportunities

The Melbourne and Sydney office markets are tightening, resulting in a significant increase in tenant demand and leasing activity. Tenants need to be mindful of market activity and plan an appropriate strategy to achieve the best occupancy outcome aligned to their core business objectives.

Property is typically the second-largest expense for organisations and according to industry experts, commercial real estate should be considered an essential business function, approached in the same way organisations outsource specialised skills such as IT, audits and legal counsel.

A professional tenant advisor acts on behalf of the tenant and has comprehensive knowledge of the evolving local market, coupled with expert negotiating skills. Tenant advisors save organisations’ time, mitigate risk and maximise cost savings before, during and after a lease term.

Renewing, renegotiating and exploring new lease opportunities from start to finish can demand a significant investment of time outside normal day-to-day business activities. In a tightening market, opportunities can quickly be missed when a tenant is not fully informed of all available options, competing interests, or simply the right process and terminology to mitigate risk and maximise commercial leverage.

However, introducing a tenant advisor to an occupier’s real estate requirements achieves more than saved money. Workplaces are continually evolving with the constant introduction of new technology, industry benchmarks and expectations from employees and clients. All of these factors should be taken into consideration when formulating a brief, noting the potential impact on the business if such considerations are delayed or ignored.

“Typically, tenants do not consider their lease until the time of renewal,” Colliers International’s director of Tenant Advisory for Victoria, Tim Farley, said.

“This often results in missing bigger-picture opportunities and leaving insufficient time to maximise options and secure the best outcome. Introducing a tenant advisor to your real estate requirements is more than just achieving cost savings.

“Lease renewals provide a change to consider bigger-picture opportunities and align your property portfolio to your business objectives.”

Mr Farley said an efficient tenant advisor tailored their strategy to meet the key objectives of their clients, whether that be by sourcing a new property to cater for growth, attracting and retaining the right talent, moving towards an agile workplace, consolidating offices or downsizing.

“Essentially, the workplace is an extension of your organisation’s brand, culture and identity,” he said.

“A good tenant advisor evaluates all factors that are important to the success of the overall business, be that attracting and retaining talent, repositioning an organisation’s brand, forecasting market changes, communicating or facilitating changes in infrastructure and driving efficiencies. There are many factors beyond price to consider and evaluate within a workplace.”

It is estimated that, on average, 80 per cent of all commercial offices in Australia now engage the services of a professional tenant advisor. This is evidence that most businesses are increasingly seeing the importance of enlisting a tenant advisor when renewing a lease or seeking new lease opportunities.

“The office market across Sydney and Melbourne is tightening so it’s an incredibly difficult time for tenants to navigate a market that is not their core specialisation,” Simon Crouch, Colliers International’s head of Tenant Advisory for Occupier Services, said.

“For occupiers who don’t seek professional assistance, the risk of agreeing to unfavourable terms or missing opportunities that may significantly impact their organisation’s culture, brand and balance sheet increases substantially.”

Mr Crouch said every organisation had its own unique business strategy and objectives which should be reflected in its commercial real estate strategy.

“We are increasingly working alongside our workplace strategists to find the right office for our clients,” he said.

“It’s important that we find offices that are tailored to each organisation’s business strategy. More often, our clients are understanding that there are many factors other than cost influencing their real estate strategy.”

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