This article is from the Australian Property Journal archive
THREE major law firms are scouring Melbourne’s office landscape and Allens Arthur Robinson said it is looking at scenarios in the event its future nest is not completed on time.
AAR’s director of corporate of affairs Chris Fogarty yesterday could neither confirm nor deny that the firm has put out a requirement in the marketplace for space despite the firm in March this year signing a major pre-commitment at APN Property Group and Leighton Properties’ development at 567 Collins Street.
He added that the discussions with backers of the development are ongoing.
The firm currently occupies some 12,848 sqm of space over nine levels at GPT Wholesale Office Fund’s 530 Collins Street building and was expected to move into 567 Collins St in early 2011.
Construction was originally slated to start in March this year but that has now been pushed back – which in turn will delay the completion of the building beyond the initial forecast of late 2010.
Fogarty was unable to comment on the speculation that in an event that 567 Collins St is not completed on time, the firm might have to look at alternative accommodation.
According to industry sources, the size of a 55,000 sqm development takes almost two and half years to complete in addition to fit out, which could stretch the timeline into 2011.
Fogarty said the firm is looking at scenarios although it has not made up its mind.
Fogarty added that the firm expects to “fairly shortly” make an announcement.
Meanwhile Minter Ellison is said to have released a requirement for around 15,000 sqm of office space — joining Clayton Utz which is also currently in search of a new Melbourne headquarters.
Minter Ellison is currently occupying 12,000 sqm at Rialto Towers and its lease expires in November 2011.
Clayton Utz is on the market for 10,000 sqm and its lease at Choice Property Pty Ltd’s 333 Collins St expires in August 2012. In Sydney the firm has signed to a new 23,000 sqm lease at Dexus Property Group’s 1 Bligh St.
Clayton Utz has received 11 offers to stay within the legal precinct around Collins and William St.
Industry sources said whilst Melbourne’s leasing market has slowed recently as a result of global economic conditions, the law firms or tenants with major requirements will only have a short window of opportunity to negotiate an attractive deal.
The Property Council’s Office Market Report shows of the 158,277 sqm due to be added in 2009 — 98% is already pre-committed.
An October office market survey by Jones Lang LaSalle also showed Melbourne bucked the national trend and recorded the highest level of positive absorption throughout the quarter, with 39,500 sqm, a fairly positive result given the current climate.
Sources said due to the current global economic conditions and financing costs, lenders have also changed their funding criteria. Where in the past, they were satisfied with a project securing a 30% pre-commitment – today a minimum of 60% pre-commitment is required in order for the banks to consider providing funding.
So until credit markets improve, the new spate of developments will come online after 2013, which means Melbourne’s office market will be undersupplied and experience strong rental growth between late 2010 and 2012.
In that event, sources said tenants are well advised to lock in their leases long term or will have no option but to renew their existing space at the higher rentals.
Australian Property Journal
