In the aftermath of economic downturns and weaker office rental markets it is clear that rising vacancies primarily affected properties in poorer communications locations.
Major cities are the engines in most economies and the capital cities are very clear centres of strength for the whole country as well as being administrative and financial centres. To an even greater extent job opportunities are created and concentrated in these cities and their surrounding regions. It is therefore very important not only for the regions but for the economic growth of the country that the major cities are given opportunities of further development. When a city grows, great demands are also placed on the expansion of communications and other infrastructure so as to make it possible. With ever-increasing commuting distances for many people in a growing region, it becomes correspondingly more important to locate offices in the immediate vicinity of communications hubs.
Communications make the Difference
In the past twenty years new office districts have grown up round the major cities. In districts with substandard communications we are now seeing increasing problems with vacancies, even in times when the rental market is otherwise strong. Many districts are located with direct links to major radial highways and are therefore readily accessible by car. Locations of this type have attracted many companies, but the lack of rail or bus communication links is becoming increasingly significant.
Important to Identify the Future Good Communications Locations
When infrastructure and communications extend our major cities, attractive new office districts close to new communications hubs are created – locations that will compete very strongly against areas with inadequate communications. Districts that are sited close only to major road links will continue to serve a function as good office areas for companies in some industries, but will face increasing difficulties when competing against new office districts that also have good public transport. When tenants start to leave the districts that are losing competitiveness, vacancies rise and rents fall. Scope for the investments and tenant improvements necessary to attract new tenants diminishes at the same time.
For property investors it is therefore important to identify the future good communications locations early on. Closely following and being early to note changed market attractiveness and the competitive situation among different office locations are thus critical for profitable property investments.