Latest in Corporate Real Estate News
Introduction
The last few years have born witness to a higher
frequency of large earthquakes in Oceania
–such as the one experienced in Christchurch,
New Zealand, on 22 February 2011. These
natural disasters have devastated surrounding
communities. The magnitude 6.3-tremor
earthquake in Christchurch destroyed 21% of
2nd Edition
commercial buildings in the City Business District
(CBD), crippled the city’s infrastructure affecting
the essential services, and ultimately claimed t
lives of 181 people.
The February disaster was the second earthqu
to impact Christchurch within six months. On 4
September 2010, Christchurch experienced a
magnitude 7.1 tremor, which undermined the
integrity of the city’s buildings and infrastructur
The February earthquake further impaired
Christchurch’s structures. Experts estimate the
Christchurch disaster is the world’s third most
expensive reconstruction project as a result of
earthquake.
The unpredictability of natural disasters makes
contingency planning for all scenarios and leve
of catastrophes a challenge. Companies must
have the ability to react swiftly with effective
resolutions. This involves assembling a team
Inside
this issue
The pendulum is
Stuck
Partnership profile:
Will momentum swing back in favour of landlords?
Corporate
Solutions
News
with diverse expertise required to deliver the ri
solution. In the wake of the Christchurch traged
to restore business operations as quickly as
possible, Telstra Clear partnered with Jones La
LaSalle to source and construct a temporary s
The Telstra Clear Situation:
Christchurch’s February earthquake damaged
all (six) of Christchurch Telstra Clear’s building
which were evaluated and given risk ratings by
the New Zealand Civil Defence. The Civil Defe
gave four sites a RED ranking, meaning the
buildings had structural damage and were uns
to enter. The two remaining buildings received
AMBER label, which meant the buildings were
considered structurally sound but in need of
serious repairs. One of the AMBER buildings w
Telstra Clear’s main office building occupied by
140 staff members.
As a telecommunications company, Telstra
Clear is considered a critical service for the
city. The community needed Telstra Clear
operational as quickly as possible. The lack of
safe accommodation for the Christchurch staff
affected Telstra Clear’s ability to provide servic
to the Christchurch area. The property team wa
charged with securing and fitting out approxima
1,700sqm of office space(s).
The pendulum is
Stuck
In 2009 most building owners were banking on a swing back to a landlord
favourable market in 2011-2012. A market where rents would climb
steeply and incentives would fall sharply. In 2010 building owners had
adjusted the predicted swing back to 2012-2013. In 2011 it has still failed
to materialise with transaction volumes low and rental growth tempered.
What is now apparent is that the swing back to a strong landlord
favourable market is not going to happen anytime soon. But things are
not all going in the tenants’ favour either with less than favourable profit
results, volatile global stock markets and difficult trading conditions.
It seems the pendulum is stuck.
on cost has also stifled the number of lease transactions, particularly
in premium assets. The exception to this are the two states in high
gear – Queensland and Western Australia driven by the mining boom.
In Perth virtually everything is leasing and in Brisbane the new premium
111 Eagle Street has taken an aggressive stance to attract tenants with
generous incentives. The continued demand and shortage of space will
push up rental levels in these cities ahead of other Australian markets.
On the flip side, the Sydney CBD is heavily weighted to banking, finance
and insurance companies – all sectors in the eye of the global financial
market storm, and activity levels are generally down.
The recent spate of negative economic shocks to reverberate around the
world economy has meant corporates are opting for wherever possible
to minimise expenditure and do nothing. Opting to delay the decision to
move and instead showing preference to restructure the lease for longer
terms and re-size as required. This is clearly evident in the volume of
lease transactions to date (September) in 2011 which is 25% lower than
the same period in 2010.
The table on page 2 shows the most significant transactions in each CBD
market over the course of 2011. Whilst the rental levels at which most of
these deals have been struck appear unaffected by the global turmoil,
landlords have structured the deals to protect their headline rents,
preferring to offer attractive incentives to tenants willing to enter into a
negotiation. These incentives typically either involve assisting with the
initial fitout or in the case of a renewal, a refresh of the fitout and/or a rent
free period or rental rebate.
Corporates continue to be ferociously bottom-line focussed as the
threat of a double-dip recession refuses to go away and the European
Union scrambles to avoid sovereign debt defaults. This stringent focus
(Continued on page 2)
The pendulum is
Stuck
Significant Reported Transactions YTD October 2011
Tenant
Address
SQM
Melbourne
Marsh Mercer
555 Lonsdale Street / 11 Exhibition Street
23,461
Minter Ellison
525 Collins Street
14,148
CBA
357 Collins Street
8,489
Service Stream
357 Collins Street
7,000
Sydney
Allen & Overy
85 Castlereagh Street
4,500
Vero
60 Margaret Street
5,223
Optiver
33-39 Hunter Street
6,500
ABS
44 Market Street
5,000
ACCC
175 Pitt Street
3,000
Energy Australia
321 Kent Street
2,200
Goodman
60 Castlereagh Street
1,800
Heidrick & Struggles
1 Farrer Place
1,425
Department of Innovation
20 Allara Street
2,000
Department of Education, Employment and Workplace Relations
10 & 12 Mort Street
20,500
Questacon
60 Denison Street
3,000
St George Bank
167 St George’s Terrace
3,018
Fluor
167 St George’s Terrace
2,582
TWP
503 Murray Street
1,100
Liberty
77 St George’s Terrace
1,728
Urbis
123 Albert Street
1,513
Microsoft
400 George Street
1,458
Norton Rose
111 Eagle Street
5,000
Rio Tinto
150 Charlotte Street
10,500
Canberra
Perth
Brisbane
Source: Jones Lang LaSalle
SydNEy vAcANcy Q3 2011 - 8.4% | PRImE gRoSS EffEctIvE RENtS - $597.00 | SEcoNdARy gRoSS EffEctIvE RENtS - $346.00
It is pretty evident that the two-speed economy is being personified in
a two-tiered property market around Australia – led by West Australia
and Queensland. Perth and Brisbane, despite being buoyed by the
mining and exploration boom, have seen the emergence of a twotiered property market in their CBDs. Newer stock in these markets
is being snapped up by companies who are committing to long-term
leases. Whereas the secondary stock is being used as project space
on a short-term basis by some of the mining companies and ancillary
services including engineers and surveyors.
This two-tiered market also exists between existing office space and new
developments. New developments that are coming out of the ground
are setting a new benchmark, particularly in the premium sector, where
headline rental levels are lower than their existing equivalent space.
Effectively corporates who are able to act quickly can relocate into a new
building at a lower rental level than an existing asset. This is particularly
the case in Brisbane and Perth where rental levels in existing premium
buildings have exceeded the economic rental level due to the strong
demand experienced from the resources sector. In Brisbane new supply
is tempering rental growth for the time being, whilst in Perth rental levels
are holding up. In Sydney and Melbourne rental levels in A-grade space
are closer to parity with the economic rent, however still ahead. An
example of this is the Norton Rose deal in 111 Eagle Street in Brisbane
where their headline rent was reported to be struck at $790 per sqm
however pre-GFC levels for neighbouring premium buildings would have
been closer to $1000 per sqm.
With the jitters in the global economy likely to stay for the foreseeable
future, the pendulum is likely to stay where it is – stuck. A spike in rentals
is not likely in Australian property markets anytime soon as corporates
take a more cautious view of the future. In the current climate, by and
large, if at all possible, a tenant will stay in their current space rather than
go to another building. Unless of course there are strong drivers such as a
strategic imperative to create profile in the market or a cultural integration
agenda, a significantly ageing fit-out and building or in some lucky cases,
a healthy growth outlook. It should not be forgotten that cost savings and
efficiencies continue to be the theme underpinning all of these drivers.
We have seen drivers such as cultural integration and alignment fly in
the face of the GFC and play a strong role in driving lease transactions
in recent years. Goodman’s transaction highlighted in the table
opposite is an example in 2011 of a corporate signing into new space
to accommodate an ABW model. Macquarie and CBA have been the
early adopters seeking space that can accommodate activity-based
working (ABW) and foster the cultural and business objectives of these
organisations. National Australia Bank are adopting ABW principals
in their new 65,000 sqm building under construction in the Melbourne
Docklands. Jones Lang LaSalle is also implementing this in their new
Sydney headquarters. Suncorp’s active requirement for 30,000sqm
in Brisbane will be an ABW showcase. Many other organisations are
trialling ABW on a limited scale to determine its suitability for wider use
across their organisations. The model also meets the dual objective of
cost efficiencies, with all these transactions set to yield significant real
estate savings over the longer-term.
The future for ABW looks bright, with the principles becoming more
mainstream than they were five years ago. As occupiers seek to do
more with less and leverage efficiencies from their space, this will
also put pressure on landlords. As corporates emerge from the global
economic turmoil, those who have adopted ABW work practices will be
able to grow their headcount without taking additional space.
For advice on creating the greatest leverage in your negotiation,
please contact:
Tony Wyllie
Head of Tenant Representation & Corporate Consulting
P 02 9220 8729
E tony.wyllie@ap.jll.com
Peter Walsh
Head of Tenant Representation, VIC
P 03 9672 6560
E peter.walsh@ap.jll.com
Michael Greene
Head of Tenant Representation, Australia
P 07 3231 1311
E michael.greene@ap.jll.com
Andrew Campbell
Head of Tenant Representation, WA
P 08 9483 8478
E andrew.campbell@ap.jll.com
Gavin Martin
Head of Tenant Representation, NSW
P 02 9220 8458
E gavin.martin@ap.jll.com
Jordan Berryman
Head of Tenant Representation Non-CBD
P 02 9220 8566
E jordan.berryman@ap.jll.com
mELBoURNE vAcANcy Q3 2011 - 5.9% | PRImE gRoSS EffEctIvE RENtS - $413.00 | SEcoNdARy gRoSS EffEctIvE RENtS - $306.00
Partnership profile: An Interview with Vito Chiodo
“Jones Lang LaSalle &
Telstra Property have
developed a strong working
relationship, evidenced by
the fact that those external
to the combined property
team find it difficult to
differentiate who works
for which company when
walking through our
workplace”.
- Craig Armstrong
Operations Manager, Telstra Property Services
Vito Chiodo
Director, Telstra Property Australia & International
What is the nature of
relationship?
What has the team delivered over
the past 12 months?
For more than a year Jones Lang LaSalle has assisted Telstra
Property achieve its goals across all sites Australia wide and assisted
our team with their goal of extending into international properties.
Jones Lang LaSalle has provided Telstra with various services
including facilities management, leasing, sustainability, real estate
transaction and property management services.
Over the past 12 months, the team has delivered significant savings
through capital works projects, supply chain management, rental
negotiations, make-good cost avoidance, improved car parking
management and more efficient energy management. All of this has
positively impacted on Telstra’s bottom line.
The successful integration of Jones Lang LaSalle into the Telstra team
is confirmed by the following comment from Craig Armstrong, Telstra’s
Operations Manager, Property Services:
“Jones Lang LaSalle & Telstra Property have developed a strong
working relationship, evidenced by the fact that those external to the
combined property team find it difficult to differentiate who works for
which company when walking through our workplace”.
Some of the major projects delivered by the combined efforts of
Jones Lang LaSalle and the Telstra Property include the reconstruction
of the Telstra Conference Centre, the Telstra Experience Centre at 242
Exhibition Street (in conjunction with Lend Lease) and the remodelling
of all floors on 242 Exhibition Street.
The opening of the Experience Centre was a major highlight for Telstra,
and this development means the Victorian business can experience
first hand how technology solutions will help them connect with
customers and industry.
PERTH vacancy Q3 2011 - 3.2% | Prime gross effective rents - $749.00 | SECONDARY gross effective rents - $518.00
The Jones Lang LaSalle
team was the main source of
assistance in the recovery of
our facilities after the recent
natural disasters affecting
Australia and New Zealand.
The actions taken by the
Jones Lang LaSalle teams were
able to assist Telstra Property
in minimising downtime, cost
and anxiety. Following the
devastating earthquake
that struck Christchurch on
the 22nd February 2011,
Jones Lang LaSalle were able
to source emergency space for
Telstra, fit-out the space and
have it operational within five
weeks. During the Queensland
flood and cyclone crisis of
December 2010 / January 2011,
Jones Lang LaSalle managed
impacted Telstra sites ranging
from retail stores to operational
sites and the Brisbane head
office, having them all made
safe and operational within
five business days.
Looking Ahead
We have achieved a lot in the past 18 months, but we have some
important focus areas for the Jones Lang LaSalle and Telstra Property
teams. We will look to improve the efficiency of our workplaces,
continue to optimise our portfolio, dispose of non-core assets and
develop strategies to enhance the experience of customers in our retail
outlets and our business in our corporate offices.
The Last Word
Jones Lang LaSalle has developed and secured a collaborative and
strong relationship with Telstra Property’s key alliance partners.
Their involvement in major projects and continued contact with our
alliance partners has assisted Telstra in becoming “one team” with
one vision. Telstra Property look forward to continuing to work with
Jones Lang LaSalle and building on our strong foundation to ensure
our team make a real impact in the industry and bring real value to
our company as a whole.
BRISBANE vacancy Q3 2011 - 7.0% | Prime gross effective rents - $457.00 | secondary gross effective rents - $330.00
Corporate Solutions News
Victorian Teachers Credit Union
Queensland Floods &
Disaster Recovery Paper
4 Advance
Drawing on Jones Lang LaSalle’s experience managing more than
150 affected sites during the Queensland flood and cyclone crisis of
late 2010/early 2011, this paper examines best practices and lessons
learnt in disaster recovery. Some of the critical procedures discussed
include communication strategy, placing essential services on standby,
incorporating short-term flexibility into long-term real estate strategy,
a post-flood check-list and conducting pre-lease due diligence in flood
(or bushfire) prone areas.
time and money. CRE teams
should develop a
short-term tactical plan for
each 12 month period
under their long-term strategic
plan that will allow
for flexibility when unforese
en circumstances
arise.
Jones Lang LaSalle was able
to leverage
knowledge across our portfolio
of client sites,
to share ideas on how to ensure
operational
readiness as quickly as possible
, as well as
sharing resources where available
. For example
inspections that were carried
out in flood-affected
areas were shared with other
occupiers that also
had facilities in the location.
Similarly, companies
could have the same results
working with major
contractors, achieving not
only economies of
scale, but also sharing informat
ion and services
with other organisations in
the disaster zone.
Lessons Learnt
One of the clearest lessons
learnt through the
recent disasters is the need
to incorporate
short-term flexibility and
tactical plans into
the long-term real estate
strategy. This is also
something that was witnesse
d during the Global
Financial Crisis. Given the
nature of the assets
they manage, CRE executiv
es have historically
been very good at preparin
g long-term, strategic
real estate plans – generall
y having a three-year
plus planning horizon. But
many were caught short
and not able to implement
tactical responses in
the face of a crisis, either econom
ic or a natural
disaster. Whether it be a requirem
ent to dispose
of space quickly or in the case
of a natural
disaster, acquire new space,
having a short-term
contingency already in place
can save significant
Introduction
witness to a higher
The last few years have born
kes in Oceania
frequency of large earthqua
ced in Christchurch,
–such as the one experien
y 2011. These
New Zealand, on 22 Februar
ted surrounding
natural disasters have devasta
de 6.3-tremor
communities. The magnitu
destroyed 21% of
earthquake in Christchurch
City Business District
commercial buildings in the
cture affecting
(CBD), crippled the city’s infrastru
ultimately claimed
the essential services, and
lives of 181 people.
In any situation where commun
ities and
businesses are impacted by
disaster, there is a
desire to return to normalit
y as soon as possible.
We experienced a number
of situations where
pressure was applied from
the business to the real
estate team to declare the
site fit for occupancy.
It is critical that the in-hous
e real estate team
(or their outsourced provider
) have the final say
on declaring a site operatio
nal again, ensuring
that all items on the pre-occu
pation checklist are
completed prior to anyone
accessing the site.
However, it is noted that these
checklists need
to be practical and focus principa
lly on restoring
essential services, where some
other works can
be undertaken once the business
has resumed
occupancy. Making them too
cumbersome will
frustrate both landlord and
tenant.
Similarly, immediately following
a disaster, it
should be the sole respons
ibility of the real
estate team to liaise with emergen
cy services
to undertake an inspection
of the site prior to
clean-up. Here liaison with
the landlord is critical to
making this happen as quickly
as possible.
Having an agreement with
preferred suppliers
that they will have dedicate
d resources in the
event of a disaster was shown
to significantly
reduce site closure time. This
is something that
organisations should consider
putting in place
with their suppliers, it saves
a lot of time and
negotiation at the time of the
event. Building
working relationships across
different property
disciplines (for example between
our facility
managers and project mangers
) ensured that sites
were habitable faster after
the flood event.
Social media proved to be
a powerful
communications tool. As organisa
tions lost
power, their servers and IT
systems failed in
many instances and social
media networks such
as Facebook and Twitter allowed
them to post
the
the second earthquake
The February disaster was
six months. On 4
to impact Christchurch within
experienced a
September 2010, Christchurch
ned the
undermi
which
tremor,
7.1
magnitude
and infrastructure.
integrity of the city’s buildings
impaired
The February earthquake further
estimate the
Christchurch’s structures. Experts
world’s third most
Christchurch disaster is the
as a result of an
expensive reconstruction project
earthquake.
disasters makes
The unpredictability of natural
scenarios and levels
contingency planning for all
e. Companies must
of catastrophes a challeng
with effective
have the ability to react swiftly
ling a team
resolutions. This involves assemb
to deliver the right
with diverse expertise required
Christchurch tragedy,
solution. In the wake of the
ns as quickly as
to restore business operatio
d with Jones Lang
possible, Telstra Clear partnere
t a temporary site.
construc
and
source
to
LaSalle
The Telstra Clear Situation:
ke damaged
Christchurch’s February earthqua
Clear’s buildings,
all (six) of Christchurch Telstra
ratings by
risk
given
and
d
which were evaluate
. The Civil Defence
the New Zealand Civil Defence
meaning the
gave four sites a RED ranking,
and were unsafe
buildings had structural damage
buildings received an
to enter. The two remaining
the buildings were
AMBER label, which meant
but in need of
considered structurally sound
AMBER buildings was
serious repairs. One of the
building occupied by
Telstra Clear’s main office
140 staff members.
y, Telstra
As a telecommunications compan
service for the
Clear is considered a critical
Telstra Clear
needed
ity
commun
The
city.
. The lack of
operational as quickly as possible
Christchurch staff
safe accommodation for the
to provide service
affected Telstra Clear’s ability
property team was
to the Christchurch area. The
fitting out approximately
charged with securing and
).
1,700sqm of office space(s
Christchurch Earthquake: Telstra
& Jones Lang LaSalle Experience
The magnitude 6.3-tremor earthquake in Christchurch in February
2011 destroyed 21% of commercial buildings in the city, crippled the
city’s infrastructure affecting the essential services, and ultimately
claimed the lives of 181 people. This paper explores the Telstra
Clear and Jones Lang LaSalle disaster recovery experience,
sharing best practice and innovative strategies to minimise site
downtime and restore operations as quickly as possible. The team
efficiently and successfully sourced and constructed 1,670sqm of
office space within five weeks of the earthquake.
To download a copy of the reports visit
www.joneslanglasalle.com.au
AdELAIdE vAcANcy Q3 2011 - 7.2% | PRImE gRoSS EffEctIvE RENtS - $358.00 | SEcoNdARy gRoSS EffEctIvE RENtS - $247.00
Our Tenant Representation and Investment Sales teams in Melbourne
were appointed to consolidate the operations of Victorian Teachers Credit
Union (VTCU) in either a leased or owned property. We conducted an
extensive search of the Boorandara area to identify new premises that
would meet their requirements for the next 10 to 20 years. Following
a lengthy review of the financials and benefits of lease vs. buy, VTCU
opted for complete control as an owner occupier and have purchased a
vacant new 5,300sqm office development at 117 Camberwell Road which
offers long term expansion potential. The consolidation of VTCU’s office
and retail buildings into one location will lead to significant efficiencies,
improved security and provide the opportunity to update the standard of
accommodation for staff in a location that is very convenient for customers.
Halliburton
Our Project & Development Services team have been engaged to provide
project management and superintendent services on Halliburton’s
new build industrial facility in Perth. The purpose of this new facility
is to consolidate Halliburton’s existing WA facilities locations into a
purpose facility at Jandakot Airport, Perth. This new $37 million facility
is a fast track project with phased client handover. Halliburton will be
operational from the new facility by November 2011. This will enable
greater efficiencies amongst their product services, improved access
to transportation links and drive their brand reputation in the local and
international resources sector.
New Appointments
Our Integrated Facilities Management group has won a number
of new appointments in the communications and digital media sectors.
We have secured the management of the new Facebook premises
at 77 King Street, above the high-profile Apple store in Sydney.
We won this business in Sydney after the successful transition of
Jones Lang LaSalle’s facilities management teams into their Hyderabad
and Singapore locations. eBay Inc has appointed us on a two year
contract to manage their facilities at 1 York Street in Sydney, covering
the eBay, Paypal, Shopping.com and Gumtree brands, again based on
success globally for this client. We have also recently secured a two
year contract for Lenovo which includes two properties in Australia and
one in New Zealand. This appointment was secured following our Tenant
Representation and Project & Development Services teams assisting
Lenovo with the expansion of the Sydney facility. Jones Lang LaSalle and
Lenovo have a global facilities management contract to support their many
locations across the world.
cANBERRA vAcANcy Q3 2011 - 12.2% | PRImE gRoSS EffEctIvE RENtS - $333.00 | SEcoNdARy gRoSS EffEctIvE RENtS - $276.00
For further information or comments on the The Wrap, please contact:
Anna Town
Director
Strategic Marketing, Corporate Solutions
Phone: 02 9220 8445
Email: anna.town@ap.jll.com
Michael Greene
Regional Director
Head of Tenant Representation, Australia
Phone: 07 3231 1311
Email: michael.greene@ap.jll.com
For further information on Corporate Solutions, please contact:
Tony Wyllie
Head of Tenant Representation & Consulting
Corporate Solutions
Phone: 02 9220 8729
Email: tony.wyllie@ap.jll.com
Chris Hunt
Head of Integrated Facilities Management
Corporate Solutions
Phone: 02 9220 8389
Email: chris.hunt@ap.jll.com
Kevin Hastings
Head of Project & Development Services
Corporate Solutions
Phone: 02 9220 8655
Email: kevin.hastings@ap.jll.com
Our office locations:
Adelaide • Brisbane • Brookvale • Canberra • Glen Waverley • Liverpool
Mascot • Melbourne • North Sydney • Parramatta • Perth • Sydney
Disclaimer
COPYRIGHT © Jones Lang LaSale IP, INC. 2011
This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be
copied, reproduced or transmitted in any form or by any means, either in whole or in part,
without the prior written consent of Jones Lang LaSalle IP, Inc. The information contained
in this publication has been obtained from sources generally regarded to be reliable.
However, no representation is made, or warranty given, in respect of the accuracy of this
information. We would like to be informed of any inaccuracies so that we may correct
them. Jones Lang LaSalle does not accept any liability in negligence or otherwise for
any loss or damage suffered by any party resulting from reliance on this publication.
JS007643
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