This article is from the Australian Property Journal archive
THE government and community sectors are driving demand for premium grade office space in the Melbourne CBB, according to Savills.
According to Savills’ preliminary figures, leasing activity has risen by circa 128% over the 12 months to March to 569,810 sqm, with the government and community sectors accounting for 38% of the space.
Savills associate director of research Monica Mondkar said this is up 128% on the 250,000 sqm leased in the 12 months prior and the five-year average of 269,943 sqm.
Savills found the government and community sectors was the dominant player leasing 224,906 sqm – 83% of which was prime grade. Direct leases totalled 77,868 sqm, while 81,000 sqm was pre-committed. Public administration was the largest sub-sector accounting for 65% of the space followed by education at 23%.
Mondkar said property and business services were the next major player with 28% followed by IT and communication at 15% and finance and insurance at 13%.
Director office leasing Phil Cullity said there were a number of factors behind the surge in leasing activity, including the renewal of government leases, consolidation of government departments, population growth, government infrastructure projects, staff retention and recruitment requirements, and efficiency gains.
“Overall governments – state and federal – have underpinned the massive take up with population growth also an important part of the equation.
“Last year net absorption was 117,000 sqm which smashed the 10 year, 86,000 sqm, average and all indications are that we are in for another 12 months like that. It’s then really no surprise that developers are pushing ahead with new buildings especially with economic rents being achieved,” he added.
Cullity said during the GFC years of 2008/2009/2010 government departments had not upgraded their space because there were fewer options available.
“A lot of government leases have recently come up for renewal at the same time and they are well overdue to move into better quality, more efficient space.
“The state government, in particular, has been proactive in taking advantage of market conditions, locking in rents and incentives, before rents begin to rise.
“Governments now realise that, as they are in competition with the private sector for the best young talent, they must offer a similar level of accommodation and that includes the latest building services including end of trip facilities, meeting facilities, amenities and access to transport, cafes,” he continued.
Cullity said government tenants were also increasingly mindful of the need for more efficient buildings in reducing costs.
| Select Melbourne CBD Office Leases to March 2017 | ||||
| Date | Property | NLA (sq m) | Term (years) | Tenant |
| May-16 | 50 Lonsdale St# | 50,538 | 10 | Dept of Treasury & Finance (DHS) |
| Jun-16 | 700 Collins St# | 15,500 | 10 | The Bureau of Meterology |
| Jul-16 | 55 Collins St | 1,035 | 10 | Medical Indemnity Protection Society |
| Sep-16 | Tower 2, Collins Square | 3,300 | 15 | Visit Victoria |
| Sep-16 | Tower 2, Collins Square | 1,900 | 15 | Austrac |
| Aug-16 | 15 William St | 7,183 | na | Administrative Appeals Tribunal |
| Sep-16 | Tower 5, Collins Square | 1,035 | 10 | Medical Indemnity Protection Society |
| Nov-16 | 530 Collins St | 782 | na | Infrastructure Victoria |
| Dec-16 | 8 Exhibition St | 4,836 | 10 | Development Victoria |
| Dec-16 | 311 Spencer St* | 65,000 | 30 | Vic Police, Aus Fed Police, Australian Crime Commission |
| Source: Savills Research *Pre-commitment #Renewal | ||||
Australian Property Journal
