Think 'green smoothie' but don't forget to mix it up

The biggest movers are smaller tenants under 1000 sqm

For the past few years, the overriding focus for office tenants has been cost containment. However, this has meant different things to different organisations - particularly when it comes to sustainability.

More than ever, tenants are looking for the best possible commercial deal in whatever sector of the market they are in. Perceived value is critical and financial conservatism reigns.

However, the stance of larger tenants has differed to that of smaller occupiers, particularly over all things green.

Larger tenants tend to appoint external advisers to drive the process. Of CBRE's top 10 clients, close to 80 per cent have a green professional with high credentials on staff who tends to be very influential in the process of relocation.

However, the biggest movers now are smaller tenants under 1000 square metres who have recently accounted for between 60 and 70 per cent of CBD space demand. They don't like financial surprises and focus on cost identification and containment during leasing negotiations. They are similarly cost conscious about green initiatives.

Occupancy cost is a huge portion of their costs. They are very, very focused on the detail, and undertake a great deal of due diligence during a deal.

So what is the best course of action for landlords and leasing agents, given that smaller tenants are expected to remain a key market driver for the next 24-36 months? My advice is to focus on engagement and conveying how green initiatives can positively impact a tenant's business. Landlord and agent need to know what they are saying and how to communicate it to their target market.

We're also seeing differing trends in certain business sectors, with the greenest tenants tending to be multinationals and engineering firms. Financial groups have been at the less-green end of the spectrum in the past 12-18 months, as have legal firms.

Never assume green considerations are not important, even if they aren't stipulated in a leasing request for proposals. Green is now an implicit requirement in many cases.

The market has also become a little more refined around green discussions so that they form part of an overall matrix. Enter the "green smoothie" analogy. When you make a healthy green smoothie, you know it's green but you also expect other flavours in the mix; apple, banana, etc. Sustainability is somewhat like that, in that tenants will consider a range of attributes for any building, green among them.

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