Increasing pressure on owners of secondary-grade offices to upgrade.

 

Under-utilised suburban office space could be re-purposed for industrial use, according to a leading property consultant.

 

Sam Tamblyn, founder and managing director of Urban Property Australia, writng in the Australian Financial Review, said the prime office sub-sector – typically energy-efficient and offering additional amenity to tenants – has been a focus during the post-pandemic period.

 

"This type of accommodation is also relatively more affordable in most cities than before COVID-19,” he said.

 

“Sustainability and perks designed to encourage attendance and attract skilled staff – bicycle repairs, yoga studios, childcare, fully serviced on-site café – are also being sought out,” he added.

 

Tamblyn said the trend will increase pressure on owners of secondary-grade offices to upgrade.

 

Industrial rental growth in many east coast markets has boomed, increasing on average 10 per cent since 2020, while land values in some regions have doubled over the past three years. 

 

This move is also seeing a re-purposing of many infill suburban properties, in particular from retail to last mile logistics warehousing. 

 

Conversion of offices to industrial, however, has been less common – but for many owners, it is an opportunity, according to Tamblyn.

 

"With new consumer trends resulting in industrial property becoming more valuable than ever before – coupled with tenant demand for older offices falling – the divergence in values of the two asset classes will persist for years to come," he said.