Alistair Walsh | 12 November 2012

Australian companies cutting real estate expenses: Ernst & Young

Corporate Australia is looking to reduce costs associated with real estate, according to Ernst & Young research.

Companies are cutting accommodation costs, which make up 10-15% of overall costs, according to Ernst & Young Capital Confidence Barometer.

Partner of the company Richard Bowman says any costs associated with owning and occupying real estate are high on the cost-cutting agenda for Australian companies.

“We are seeing tenants reducing the space they occupy and owners selling down any surplus sites they have,” Bowman says.

“Clients want to know what potential levers they have at their disposal to minimise occupancy costs, from fighting market rent reviews, reviewing service contracts through to challenging outgoings such as rates and taxes.”

Bowman says real estate companies should be changing tactics to work with corporate clients.

“The real estate sector should be taking advantage of flexible deal structures to fulfill their growth agenda by using development agreements, joint venturing and extended term contracts to help get deals done,” Bowman says.

According to the report there will an increase in sub-lease office leasing over the next 12 to 18 months will put downward pressure on net effective rents across most parts of the market.

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