This article is from the Australian Property Journal archive
TENANTS are flocking to Melbourne’s city fringe office markets of St Kilda as an affordable alternative to the CBD.
CBRE global research and consulting associate director Glenn Lampard said rent increases in the CBD and Southbank have reinvigorated St Kilda Road, which had struggled in recent years.
“Moving forward, St Kilda Road is likely to become an affordable option for some occupiers and this should reduce vacancy levels and sustain rental levels in St Kilda Road in the long term.
“Whilst vacancy remains high in the St Kilda Road precinct generally, significant tracts of space are under offer at rentals showing growth in net face rents, suggesting available stock levels are not as problematic as the headline vacancy rate implies,” Lampard said.
CBRE’s latest Melbourne MarketView report shows the Southbank vacancy rate has fallen driving up rentals by 4.3% in Q1 – the level of growth initially predicted for the full 2011 calendar year in comparison to St Kilda Road rent growth of 3.2%.
Southbank rents averaged $339 a sqm at the end of Q1 compared to the $259 a sqm average in St Kilda Road.
Lampard attributed the higher rentals in Southbank to the new developments such as Twenty8 Freshwater and South Wharf tower. While the area’s vacancy rate was 6.3% at the start of this year, completed deals are expected to reduce the vacancy rate to below 5% by year’s end and just below 3% in 2013.
CBRE director Grant Tinker said declining options for tenants and positive rental growth should play in the favour of the St Kilda Rd precinct.
“While a speculative build may be unlikely, a pre-commitment could support a significant new tower in the precinct, which has grown considerably in recent years to now total 427,400 sqm of office space.
“With the Melbourne CBD now having the lowest vacancy rate of all major city centres in Australia, and rents having risen considerably in Southbank, companies are looking at St Kilda Road as an alternative,” he added.
“These types of tenants are gravitating towards higher quality buildings and are attracted by the competitive rentals on offer in this location,” Tinker concluded.
Australian Property Journal
