This article is from the Australian Property Journal archive
MORE than 300,000 sqm of premium and A grade projects delivered this year have crowned the Melbourne CBD as Australia’s largest city office market.
According to JLL research, three completions since the second quarter have taken Melbourne’s office stock total from about 4.953 million sqm to 5.108 million sqm, beyond Sydney’s 5.024 million sqm.
The latest projects to reach completion are Cbus Property and Keppel REIT’s Victoria Police Centre at 311 Spencer St, the Lendlease Two Melbourne Quarter at 697 Collins St, and Dexus’s 80 Collins St.
JLL’s managing director (Victoria), Craig Shute said the completion of these three projects “marks a real inflection point in the dynamics of Australian CBDs”, and given growth trajectories the new rankings are unlikely to change.
Despite the large amount of supply coming online, 94% of the 313,700 sqm office stock being delivered in Melbourne this year is already pre-committed.
Net absorption rates across Australia’s CBD office markets collapsed in the June quarter as the pandemic upended conventional working arrangements. Melbourne CBD recorded 42,300 sqm of negative net absorption, while the completion of a new developments and associated backfill space pushed the vacancy rate up to 7.7%. Gross effective rents across the major eastern seaboard CBD office markets fell.
Other projects completed in the Melborune CBD earlier during 2020 include Mirvac and Suntec REIT’s Olderfleet building at 477 Collins St (56,584 sqm), Cbus Property and ISPT’s Collins Arch at 447 Collins St (47,517sqm), and Charter Hall’s Wesley Place at 130 Lonsdale St (55,000 sqm).
“This rapid rise is testament to Melbourne’s balanced economic drivers and will result in an increase of national and global investment capital seeking a foothold or looking to expand their portfolios in the city,” Shute said.
“We are confident Melbourne will rebound relatively strongly as we recover from the current COVID-19 restrictions and re-open for business.”
Office markets around the world are facing an existential crisis, as businesses gain a real-time understanding of business capabilities while employees and executives work from home, and in a harsh economic environment begin to reconsider see real estate costs.
JLL includes Southbank of 228,040 sqm as part of the CBD office stock, while the Property Council of Australia classifies the precinct as fringe. The firm has been tracking office stock in Melbourne’s CBD office market since 1970, when the size of the market was just 1.45 million sqm.
Annabel McFarlane, JLL’s senior research director (Victoria), the most significant contribution to this growth has been Docklands as a new CBD precinct, delivering just over 1 million sqm of new, high quality office stock.
“Significant momentum and strong demand throughout the last 20 years has supported office market development,” she said. Melbourne’s CBD office market has accounted for 40% of all CBD net absorption, or 1.7 million sqm, in the six CBD markets JLL tracks.
This compares to Sydney (739,900 sqm), Canberra (647,600 sqm), Brisbane (542,850 sqm), Perth (293,700 sqm) and Adelaide (291,300 sqm).
Melbourne and Sydney’s CBD office markets are now comparable in size to a number of major international CBD office markets include that Madrid, at 6.5 million sqm, Barcelona at 4.9 million sqm and Berlin at 4.5 million sqm.
