Companies offered ‘rent to buy’ option for office space in a first for Australian commercial real estate
Companies struggling to calculate how much office space they will need when employees slowly return to work are offered an option to buy, which is believed to be the first in Australian commercial real estate.
The developer of a new $ 23 million office building in West Melbourne has launched a business model that lets suites be rented for up to 12 months to see how their business performs. You can buy later and deduct the rent paid from the purchase price.
“I’ve spoken to many business owners and senior executives and the topic of conversation is invariably what they are doing with the return of their workforce and space requirements,” said Patrick Archer, CEO of Cedar Woods. “There is still so much uncertainty.
“So I figured if we could give them some flexibility that would help when companies are trying to decide whether to move to new premises and how much space they will need when things go as they should hope. “
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The initiative was launched in a seven-story, 6,000-square-foot building in the 50-acre Williams Landing Town Center, which is part of a new planned suburb and is a 20-minute drive from Melbourne’s CBD. The 71 suites, each around 160 square meters – suitable for 10 to 15 employees – are sold for around US $ 800,000 or rented for US $ 50,000 per year.
If the experiment proves popular, it could become a template for trade offices across Australia.
“I’ve never come across this ‘rent to buy’ option,” said Tony Crabb, National Research Director of Cushman & Wakefield. “It’s a novel idea. Most stratified properties are either bought by owner-occupiers or bought and rented by an investor.
“But at a time like this, with such dramatic changes, misfortune seems to be the mother of invention, and that is exactly it. This notion of try before you buy is a good idea and a win-win situation. This means that the landlord is making an income and a potential buyer can see how it works. If things go well, it could be taken over elsewhere. “
The model is well known in the residential space as companies like Assemble offer Melbourne apartments that can be rented for five years with the option to buy at a fixed price at the end of the period. That way, residents can see if the community suits them and they can save for the potential purchase during their tenancy – or simply move out at the end instead.
But most believe that in the commercial field it has never been tried before.
“I’ve never come across this before,” said Thomas Fredriksen, director of office leasing at ONYX Commercial Property, who previously worked with Colliers International and Knight Frank in the same industry. “In 14 years in commercial real estate, I’ve never heard of it.”
Mr Archer believes this could be a great way to control business indecision while the trust has yet to fully return, especially since the City of Wyndham. where Williams Landing falls. has the highest number of new registrations in Victoria.
“There is high demand for this area as it is only 20 minutes from downtown and has its own transportation hub, motorway interchange and regional bus hub,” said Archer. “It also has a town center and apartment buildings – both completed and under development – that will eventually provide 2,400 homes. It has huge potential. “
The offices in Cedar Woods’ smaller, five-story, 5500 square meter block of 47 offices, also on Overton Road, were sold out before construction began. The founding director of M&C Accountants, Carmel Filippone, was the first to buy in.
“I had been working from home looking for a good location and I came across it,” she said. “We can fit about 20 people in the office I bought so we have plenty of room to grow. It’s a beautiful new building overlooking Melbourne’s business district, 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 a chance to move in and see what it’s like, especially if the rent you’re paying is then going towards the purchase price. It’s a bit like a accounts payable system. And if a great developer like Cedar Woods did, you’d think others would pick it up too. “
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