Are Fitted Suites So Fitting?

Are Fitted Suites So Fitting?

“Spec”, “as new”, “retrofitted”, “existing”, “partial”, “ready-to-occupy”, “move-in ready”, …. fitout.

Anyone involved in the CRE office market at the moment is bombarding or bombarded with spec fitouts (brand new) or existing fitouts (not brand new). All are “fitted” suites. There are many really good quality ones but there are also some real shockers. The best thing is they have improved immensely over the last couple of years as Lessees have seen through the veneer.

It’s a great concept and not a new one. Fitted suites arise when it gets harder for a Lessor to lease vacant space. This current wave started well before Covid when the vacancy rate in Sydney and Melbourne was heading towards 3%. But we still needed fitted suites in the tightest markets since the mid 1980’s.

But how great are they and for whom?

The concept is simple. Lessors have vacant space, they engage a designer to design a suite that will suit many different types of tenants, and they build at a price that is lower than what a Lessee would pay for the same fitout.

The issue for the Lessees is that the spec suite has been designed without any consideration of the Lessee’s spatial needs. In effect the Lessee is leasing someone else’s fitout.

Other issues? None of them are perfect. The suites rarely suit the Lessee’s requirements so changes need to be made. This adds additional cost for the Lessee and can lead to the Lessee paying way more for a fitout than they should have in the first place. Great for the Lessor but not so great for the Lessee.

What are some answers?

Lessees should seek advice from an experienced tenant rep and check. Nothing is ever as it seems.

For Lessors? Can there be some fitout in place and the Lessee finishes the fitout to its own taste and needs? Can the Lessee get a bespoke / turnkey solution? This works but only when the Lessor and Lessee really work together. We have done this with some of our Lessee clients. Both sides get what they want (not just the Lessor), and chances are they will be in a longer lasting relationship than the use-by-date of a spec fitout.

Are fitted suites so fitting? Not as much as they could be. The good thing is, the softness of the market is improving the situation for the Lessees and we are happy to show you how.