Within a year of arriving, Amazon had already made its mark with two huge warehouses and a 20,000sq m office in Sydney. Now the company is set to announce a deal that will shake up Australia’s commercial property landscape further.
The e-commerce giant is expected to move to new headquarters, at 2 Market Street in the heart of Sydney’s CBD, pushing the Commonwealth Bank, Allianz and Caltex out, and doubling their space to 40,000sq m.
“The share of tech and media leasing activity in the office market in the past four years has been 12 per cent and that’s significant,” Knight Frank head of research Ben Burston said.
For Apple and Facebook, a country presence with a small number of staff is important, while Google and Amazon are much more committed to growing their brands in Australia, Kymbal Dunne, Knight Frank’s director of client solutions, added.
“Amazon is focused on growing its business and network of warehouses – at the end of the day they are looking to replace shops. Google was going to anchor the NSW government’s White Bay project, so they were wedded to doing something quite innovative in Australia,” Mr Dunne said.
Google’s big footprint in Australia
Search and advertising giant Google is instead transforming the suburb of Pyrmont into a campus-style HQ and creating the largest footprint of all the FAANGs in Australia with 50,000sq m across three buildings.
“The biggest thing with those big international players coming to town is the ripple effect on the office market,” said architect Adam Haddow, of SJB, which designed the refurbished warehouse where WeWork and Domain have their offices nearby.
“Landlords are saying ‘what would Google want, what would Atlassian want if they’re going to be enticed to the space?'”
Adrian Taylor, office chief executive of commercial property landlord Charter Hall, said the big tech players have also had a significant effect on CBD prices and vacancy rates.
Some of Charter Hall’s big-name tech tenants in Australia include Amazon, Twitter, Linkedin and Microsoft.
“They are looking for high A-grade assets with premium services. They’ll strike the most attractive deals they can but it’s more important [for them] to attract and retain talent than save the last percentage of rent,” Mr Taylor said.
Willing to pay a premium for a prime location, the tech giants are creating more competition among tenants and pushing up rents in a market with very little supply.
When social media powerhouse Facebook made its Australian foray in 2009, with its first office in Sydney – 3000sq m above Apple’s flagship store on George Street – it kick-started a cultural shift across our two largest cities.
“We’ve seen a big change in Sydney’s CBD where Martin Place, which used to be the home of high-end finance, has also become the home of big tech,” said architect Kellie Payne, whose firm Bates Smart designed Facebook’s Sydney offices.
“You see CommBank moving to the tech park and then you see Google, Apple and Facebook all in the area around Martin Place and taking over CBD space.”
Apple the first mover and shaker in Australia
The other FAANGs have had a huge sway over the office market, but Apple’s arrival in 2008 – when iPods were all the rage – was a game-changer for Australia’s retail sector.
Their first retail store, a commanding glass building in a prime location on Sydney’s George Street, set a new benchmark for customer experience.
“Apple is the pinnacle of driving the most pleasurable customer experience and that starts from the moment you walk through the door,” Rich Lister and chief executive of shopping centre owner Precision Group Shaun Bonétt told AFR Weekend.
Retailers have since either followed in the tech giants’ footsteps or are “regrettably failing to be able to meet the new demands of the consumer”, he added.
In 2013, after spending $28 million on refurbishments, Apple opened its largest store in Australia – about 2000 square metres – inside Precision Group’s MacArthur Central shopping centre in Brisbane’s CBD.
With 22 stores across the country already it now plans to build “the most significant store in the southern hemisphere” in Melbourne’s Federation Square by 2020.
Netflix does not have a property footprint in Australia and the subscription TV provider is not expected soon. But its FAANG brethren are more than making up for it.
“There’s no question that the establishment of technology companies [like Apple] both from a retail and office perspective has had a profound effect on the property market.”