Office vacancy rates remain low for Melbourne in the first quarter of 2020, with the key drivers being competitive rents and a great city lifestyle.
The city continues to prepare for future growth with over 600,000 sqm being supplied by 2022. Over 400,000 sqm of this will come to market in 2020. *
The latest data from the Property Council of Australia reveals that, as of January 2020, Melbourne’s vacancy rate is the lowest in the country, with only 3.2%, compared to Sydney, which has a vacancy rate of 3.9%. This makes our city the tightest leasing market in the country.
*This article is based on data from The Property Council Of Australia 2020 Office Market Report
So what are the factors that have led to this escalation in demand for office space?
Economic and employment growth has seen more businesses centralising from surrounding markets. This, together with a new working landscape which focuses on agility, ‘space as service’ and flexible work is pushing up demand. Buildings in the CBD have become part of the “War for talent” where businesses fight to keep their employees through healthy and happy workplaces.
In the past year, Melbourne office vacancy rate in the CBD has fallen from 3.8% to 1.7% for Premium Grade buildings and from 2.4% to 2.1% for A Grade buildings*. While this places significant pressure on vacancies, it’s not all bad news for commercial tenants…
BRM Senior Property Consultant, Matt De Propertis spoke recently about the additional stock that will begin to flow into the market in the mid to later part of 2020. “This new supply will put the power back into the hands of the tenants”, said De Propertis, “It gives them greater choice in buildings that are of higher quality, with more facilities and services than we’ve ever seen before in Melbourne”. As the new builds are improving, so too are the existing office buildings in the CBD which need to keep up with the standard of the new spaces popping up around them. We’re seeing upgrades to design and new additions like End Of Trip Facilities to keep commercial tenants interested. All of this will contribute to a more exciting city to work in.
Also worth a mention are the city fringe developments which are becoming increasingly popular with businesses due to the lifestyle they offer. In 2020 commercial tenants have greater choice when it comes to location and many of them are choosing not to be within the cluster of the CBD. Rather, they are choosing trendy areas close to the CBD which have lower rental prices, access to cafes, parks and a lifestyle that is less hectic. In these areas there is a large rate of conversion from residential to commercial development sites as it becomes more cost effective to conduct business from a less centralised location.
*Property Council Of Australia 2020 Office Market Report
Are you thinking of renting in the Melbourne CBD? Download BRM’s market report and our 4 step guide to CBD Leasing for Melbourne A/B+ Buildings.
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