Is an Office Space a Smart Investment Choice?

Office spaces are often confused with retail properties, but they serve a distinct purpose. If over 75% of a commercial property's interior is designed for office use, it is typically classified as an office building.

Offices are categorised separately because they usually require minimal fit-out costs. They primarily function as workspaces rather than places for producing or selling goods.

Leasing and Financial Aspects

Office space leases generally span three to five years, with tenants responsible for all outgoing expenses. However, in larger buildings, landlords often cover costs through gross leases, depending on the property's location and style.

Offices can be found in single-story suburban buildings or high-density city towers. According to Colliers, a leading commercial real estate firm, building heights are classified as low-rise (under 7 floors), mid-rise (7-25 floors), and high-rise (over 25 floors).

Investment Opportunities

While large investors may purchase entire office buildings, smaller investors can acquire individual office suites at more affordable prices.

Offices can serve as operation centres for retailers, premises for professional services like accounting or law firms, or bases for project management or service businesses.

Unlike retail, foot and road traffic are less crucial for offices, especially for established businesses. However, ground-floor locations may be advantageous for new or franchised businesses.

Location and Infrastructure Importance

The geographical location of an office is critical, as it needs to be situated in an area with a suitable workforce for the business's needs.

Other important factors include the building's aesthetics, internal fit-out, accessibility for disabled individuals, material quality, parking availability, public transport access, and proximity to amenities. Many modern office buildings offer on-site cafes and nearby restaurants and shopping to meet tenant needs. They must also accommodate current and future technology requirements.

Floor plan size and configuration are also essential, as different tenants require varying amounts of space, storage, and warehousing based on their work.

The Evolving Office Market

The most desirable office tenants are well-established businesses or those in growth industries with long-term potential.

As technology advances, physical space becomes less crucial, and business type is increasingly important.

The job sector significantly influences office space demand, impacting rental growth and construction. Offices thrive during economic expansion and struggle with stagnant job growth.

Technology is driving significant changes in office spaces. The COVID-19 pandemic accelerated the shift towards flexible working arrangements and locations, reducing the importance of physical space.

There is a growing demand for flexible workspaces and higher-density workplaces to optimise property assets. Offices are transitioning from traditional uses to more creative spaces that foster socialising and in-person collaboration, affecting fit-out and layout requirements.

Remote Work and Future Trends

With more employees working from home, some office areas are declining. As residential real estate near city centres becomes expensive, businesses move to smaller, more affordable office locations.

As remote work becomes more accepted, there will likely be an increased focus on mental well-being and integrating educational facilities within office environments to enhance the occupier experience.

Office facilities will need to provide an enjoyable experience to attract employees.

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