Rental rates and location are top of mind for tenants, not green issues – survey


The two most important factors for prospective tenants looking for office space, industrial premises and retail space is rental rates and location, a Bayleys Real Estate survey shows.

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The two most important factors for prospective tenants looking for office space, industrial premises and retail space is rental rates and location, a Bayleys Real Estate survey shows.

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Environmental and green issues are not top of mind for businesses and their owners when looking for commercial premises, a Bayleys Real Estate survey shows.

The two most important factors for prospective tenants looking for office and retail space and industrial premises was rental rates and location, Bayleys Corporate and Occupiers services head Chris Menzies said.

It surveyed its clients from a cross-section of commercial, retail and industrial tenants – ranging from individual property occupiers through to multi-location corporates. About 340 responded.

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The survey asked tenants what they rated as the most critical factor for their business when considering a new lease agreement. 

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Chris Menzies, head of Bayleys Corporate and Occupier Services,  says the survey shows environmental conscience sits in the 'nice to have' basket, but does not necessarily pay a dividend.

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Chris Menzies, head of Bayleys Corporate and Occupier Services, says the survey shows environmental conscience sits in the ‘nice to have’ basket, but does not necessarily pay a dividend.

The options were rental affordability, location/profile, parking and proximity to transport, environmental responsibility/sustainability/green rating, flexibility of lease and other.

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Only one could be ticked. No respondent ticked environmental/sustainability/green rating.

A combined 42 two percent of respondents ticked ‘rent affordability’ and ‘location/profile’ as the key influencers of their leasing decisions, Menzies said.

Coming in third on the list of priorities at eight per cent was parking and closeness to transport. Flexibility of the lease term was only the most important aspect for three percent of respondents.  

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“As a major outgoing in any company’s financial forecasting – alongside staffing costs and cost of materials – rent is a business cost which can be controlled if it is proactively managed,” Mr Menzies said.

“The survey figure that really surprised us was that none of the respondents rated the environmental-sustainability aspects of potential premises as a key motivating factor in their selection process.

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“I think that shows that an environmental conscience certainly sits in the ‘nice to have’ basket, but unless your business is generating a positive cashflow, then ‘nice to have’ doesn’t necessarily’ pay a dividend at the end of the financial year, ” Menzies said.

Rising rents and workplace compliance costs were identified as the biggest factors for ongoing leasing of commercial, retail and industrial properties. 

Some businesses had strict policies around the structural integrity of buildings related to their earthquake resilience.

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Asbestos remediation was viewed not so much as a cost but more as a business disruption. A lack of understanding from landlord and tenant about what was required with asbestos was common.

Some businesses have strict policies around the structural integrity of buildings related to their earthquake resilience.

JOSEPH JOHNSON/STUFF

Some businesses have strict policies around the structural integrity of buildings related to their earthquake resilience.

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The cost of making workplaces compliant under the Health and Safety Act 2015 was regarded as a significant and unavoidable cost.

From the tenants’ perspective, the current property market was skewed in favour of landlords in lease negotiations.

The majority of survey respondents were still managing their leases and their property portfolios manually, relying on basic processes to manage critical dates such as rental reviews, pending lease expirations, and property maintenance scheduling. And about 20 percent of respondents waited for their landlord to remind them of pending events, Menzies said.

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