This article is from the Australian Property Journal archive
MELBOURNE’S South Yarra office market is set to double in size over the next four years, headlined by three major projects introducing 80,000 sqm of new space that will open the door for larger operators to set up in the city fringe locale.
The bulk of that will be part of Newmark Capital’s $1.25 billion redevelopment of the Jam Factory, with some 50,000 sqm across four buildings.
Another 25,000 sqm will be located at Goldfields Group’s 627 Chapel Street, and another 4,000 sqm at Chapel Plaza at 402 Chapel Street.
“No substantial office building over 4,000 sqm had been delivered in South Yarra in the last six years – all development in the last five years has been in the Forrest Hill precinct, so as new office space comes online, it joins a thriving, mostly residential, development market in this area.” Colliers national director of office leasing Rob Joyes said.
“In recent years, large occupiers of 4,000 sqm-plus have had to focus on other city fringe areas such as Richmond and Cremorne due to a lack of options in South Yarra.”
The boom across Richmond and Cremorne has seen the latter market converted from an industrial precinct to a tech-oriented hub, boasting a high-profile group oriented tenants including Seek, REA Group, Carsales.com.au and MYOB, while other occupants in the area include Tesla, Uber and Disney.
Online real estate company Domain is reportedly in discussions with Bayley Stuart to lease around 2,000 sqm in the office development on the Nuttelex factory site at 600 Church Street.
While a string of developments has been able to accommodate a seemingly insatiable demand for space across Richmond and Cremorne, that has also spilled over to neighbouring areas and spurred a string of new commercial projects in areas such as Collingwood as business look beyond the high rents and sharp vacancies of the CBD.
Last week, global real estate firm Hines announced plans to develop a $200 million timber office building on a 2,120 sqm corner site at 36-52 Wellington Street.
Colliers data shows South Yarra’s net lettable area was 97,000sqm as of March. Research manager Sarah Walker said demand in the CBD showed that for every new head of population, 0.9 sqm of office space is demanded. Office supply in the Melbourne CBD had broadly kept pace with population growth until 2015, but the increase in population has outpaced CBD supply growth.
“This has contributed to the exceptionally low vacancy we are recording in both the CBD and city fringe markets,” Walker said.
She said the supply and demand imbalance is forecast to become even greater and the undersupply in the CBD would need to be met by alternative markets.
“Tenant location preferences are continually moving towards greater emphasis on accessibility to public transport and amenity for staff. City fringe markets, particularly those serviced by a train station, are best positioned to capture this demand.
Vacancy in the city fringe has sat at below 4.5% for two years now.
Joyes said office leasing teams were seeing a strong desire from businesses to cater to the lifestyle of their staff.
“People want to work, live and play in close proximity, and South Yarra offers not only easy access to the CBD for meetings but an abundance of after-hours entertainment and amenity for employees to enjoy.”
The Jam Factory redevelopment will feature a dedicated pedestrian connection linking the precinct to busy South Yarra railway station.
“This once in a generation development will truly unlock the full potential of this commanding 1.8-hectare site in one of Melbourne’s fastest growing and most affluent suburbs,” Joyes said.
Jonathan Bradhurst, Newmark Capital project director, said culinary, physical fitness and wellness and entertainment businesses see the value of bringing their services to South Yarra to reach the millennial, educated demographic that makes up nearly 50% of the neighbourhood’s residents.
Australian Property Journal
