03 CHANGING OCCUPIER BEHAVIOUR
CUSHMAN & WAKEFIELD | 19
AUSTRALIA'S OCCUPIER MARKET OUTLOOK
RELOCATION COSTS REMAIN A HURDLE Payback is the key: the decision to move is increasingly determined by whether operational savings can repay the upfront cost of relocation.
Building the business case for relocation From upfront cost to payback ($/sqm)
Relocation costs remain one of the biggest barriers to occupier movement. Our analysis indicates gross relocation costs can exceed $140/sqm in markets like Sydney, before allowing for landlord incentives and other forms of support. However, the more important question is whether the new facility can generate sufficient operational savings to justify that upfront cost. Transport efficiency, labour productivity, storage capacity, energy performance, automation and network consolidation can all contribute to the payback. This is shifting decision-making away from a simple lease comparison towards a broader operating model assessment. A higher-rent facility can still make financial sense where it lowers total supply chain costs, improves service levels or enables the business to operate from a more productive footprint.
~70% Early access and/or racking support can remove approximately 70% of the occupier's effective relocation exposure in this scenario, reducing the payback period from 4.2 years to 1.9 years.
$160
$140
$120
$100
$80
PAYBACK PERIOD
$60
4.2 years
$40
$20
$0
Net upfront cost divided by annual operating savings
Gross relocation cost
Incentive Offset/ Landlord Support
Net upfront cost
Annual operating savings
Make-good
New site capex
Goods & equipment transport
Racking
Incremental rent during overlap
Professional fees
Downtime
Assumptions: 10,000 sqm existing and new facility in Sydney; existing gross rent of $265/sqm; new gross rent of $275/sqm; two months' rental overlap during transition; standard racking and basic automation; light works (not a full refit); professional fees equivalent to 2.5% of hard costs; 20% lease incentive; estimated annual operating savings of $22.4/sqm.
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