MARCH 2017 MELBOURNE OFFICE VACANCY GUIDE ADVISORY & TRANSACTION SERVICES - OFFICE LEASING www.cbre.com.au MELBOURNE OFFICE VACANCY MARCH 2017 CONTENTS WELCOME CBRE IS PLEASED TO PRESENT THE MARCH 2017 EDITION OF THE MELBOURNE CBD OFFICE VACANCY GUIDE. THIS GUIDE HAS BEEN + Market View PREPARED IN ORDER TO ASSIST OUR CLIENTS IN MAKING INFORMED DECISIONS BASED ON CURRENT MARKET INTELLIGENCE. + Market Vacancy + CBD Vacancy Report CONTACT US ANDREW TRACEY MARC MENGONI CAITLIN MURDOCH MARK BOLIS PATRICK MOUNT Regional Director Director Senior Associate Director Senior Associate Director Senior Associate Director T. +61 3 8621 3325 T. +61 3 8621 3416 T. +61 3 8621 3417 T. +61 3 8621 3322 T. +61 3 8621 3337 M. +61 412 809 300 M. +61 413 484 966 M. +61 417 473 015 M. +61 412 237 809 M. +61 413 253 593 [email protected] [email protected] [email protected] [email protected] [email protected] SCOTT MCGLONE WILL DUNGEY ED LOWER CHARLOTTE MCCANN JAMES ALLEN Associate Director Manager Manager Negotiator Analyst T. +61 3 8621 3336 T. +61 3 8621 3495 T. +61 3 8621 3324 T. +61 3 8621 3061 T. +61 3 8621 3060 M. +61 419 468 871 M. +61 400 994 351 M. +61 423 734 043 M. +61 419 042 088 [email protected] [email protected] [email protected] [email protected] [email protected] MELBOURNE OFFICE VACANCY MARCH 2017 MARKET VIEW MELBOURNE CBD OFFICE Demand Supply Rents Absorption Victoria’s state final demand continued to grow over Over 2016, the Melbourne CBD saw the completion The Melbourne CBD leasing market continued to Net absorption in the Melbourne CBD has now been the 12 months ending September 2016, up 2.5%. of just under 110,000sqm of new office supply. This strengthen in Q4 2016, recording its fourth positive for 13 consecutive years, and is expected to Strengthening demand in the Melbourne CBD has supply comprised of two buildings – Towers 2 and 4 of consecutive quarter of positive growth in net effective remain positive over the short to medium term off the seen vacancy trend downwards over the last two years, Walker Corporation’s Collins Square development – rents. Prime face rents were up 1.6% over the quarter, back of the forecast growth in white collar estimated at 6.4% in December 2016. bringing 70,700sqm and 38,500sqm respectively to and 5.9% year-on-year to average an indicative employment. the Docklands precinct. $525/sqm. Further supporting growth in effective The Melbourne CBD recorded growth of 1.3% in white rents, prime incentives shed 15bps over the quarter to Vacancy is expected to continue contracting in 2017 collar employment over the 12 months to September The supply pipeline in 2017 will be subdued, with only average 32%. Prime effective rents averaged $360/ off the back of positive growth forecast for white collar 2016. Melbourne’s white collar workforce is predicted 8,000sqm of new supply to be added as part of the sqm in Q4 2016, up 1.8% over the quarter, 7.2% employment and minimal new supply. Lower vacancy to continue expanding, with growth of 1.8% forecast regeneration of Rialto Towers. Bank of Melbourne has year-on-year. will support further growth in net effective rents as the over 2017. Likely to support employment growth over pre-committed to 5,000sqm of this additional space. Melbourne CBD transitions away from being a market this time are the accommodation and food, finance Supply will pick up again in 2018 with the completion Secondary rents have also strengthened, with face favouring tenants to a market favouring landlords. and insurance, and information media and of 25,000sqm at 664 Collins Street (with a rents up 0.8% over the quarter, and 4.4% over the telecommunications sectors. 10,000sqm pre-commitment from Pitcher Partners) year to reach an indicative $350/sqm. Secondary and 24,000sqm at One Melbourne Quarter (with a incentives dropped 70bps over the quarter to 31%, By sqm volume, the Professional, Scientific and 5,000sqm pre-commitment from Arup, and a reflecting a 12 month decline of 125bps. Secondary Technical Services sector accounted for the largest 7,000sqm pre-commitment from LendLease). Beyond effective rents averaged $240/sqm in Q4 2016, proportion of enquiry during Q4, followed by 2018, a further 160,000sqm is due for completion reflecting quarterly and annual growth rates of 1.9% Education and Training, then Public Administration over 2019-20. and 6.3% respectively. and Safety. As a result of positive growth in white collar employment and a modest supply outlook, vacancy is predicted to continue its decline in 2017. MARCH 2017 MELBOURNE OFFICE VACANCY MARCH 2017 MELBOURNE VACANCY REPORT VACANCY STATISTICS MELBOURNE EASTERN NORTH WESTERN TOTAL CIVIC FLAGSTAFF SPENCER DOCKLANDS SOUTHBANK CORE EASTERN CORE CURRENT NLA (sqm) 4,526,062 467,516 650,547 309,860 348,383 258,393 1,586,864 904,499 405,737 DIRECT VACANCY (sqm) 270,871 24,891 14,021 7,887 48,647 18,799 127,824 28,802 16,333 SUBLEASE VACANCY (%) 20,438 400 5,999 3,532 0 5,720 4,087 700 250 TOTAL VACANCY (sqm) 291,309 25,291 20,020 11,419 48,647 24,519 131,911 29,502 16,583 VACANCY RATES (%) 6.4% 5.4% 3.1% 3.7% 14.0% 9.5% 8.3% 3.3% 4.1% SOURCE: PCA FEBRUARY 2017 LEGEND AVAILABLE 2017 MARCH 2017 AVAILABLE 2018 SUB LEASE 56 55 PREMIUM GRADE MARKET 54 53 52 51 50 49 1,000 48 51 50 458 47 50 PREMIUM GRADE 49 46 49 48 665 45 48 MARKET SUMMARY 47 298 44 47 Grade Market Premium 46 226 43 46 45 283 42 45 44 500 41 44 + Total NLA: 746,387sqm 43 311 40 43 42 39 42 41 38 41 + Total Direct Vacancy: 42,390sqm 40 37 40 39 36 39 38 35 1,566 38 + Total Sublease Vacancy: 7,259sqm 37 34 1,566 37 36 33 1,566 36 + Total Vacancy: 49,649sqm 35 1,860 32 1,566 35 34 1,862 31 1,566 34 567 COLLINS STREET 120 COLLINS STREET 33 525 COLLINS STREET 30 33 + Vacancy Rate: 6.7% 32 29 360 ELIZABETH STREET 32 MELBOURNE MELBOURNE 31 MELBOURNE 28 MELBOURNE 31 30 27 30 29 26 29 28 25 28 27 24 27 26 26 23 26 25 25 22 25 24 24 21 24 LEGEND 23 23 20 23 22 22 19 22 1,166 21 709 21 18 21 20 1,360 20 17 20 19 19 16 19 2,067 18 18 1,786 15 18 AVAILABLE 2017 17 17 1,634 14 743 17 16 16 1,656 13 1,480 16 15 15 1,651 12 15 14 14 11 14 13 13 10 13 AVAILABLE 2018 12 12 9 12 11 11 8 11 10 10 7 10 2,602 9 9 1,662 6 9 Typical Floorplate 1,140 - 1,900sqm 8 Typical Floorplate 1,140 - 1,900sqm 8 Typical Floorplate 875 - 2,000sqm 600 5 Typical Floorplate 1,556sqm 8 NLA 64,000sqm 7 NLA 64,831sqm 7 NLA 84,000sqm 402 4 NLA 65,000sqm 7 SUB LEASE 6 6 1,856 3 6 Asking Net Rent $550 - $610 5 Asking Net Rent $495 - $640 5 Asking Net Rent $450 - $750 2 Asking Net Rent $500 - $600 5 Outgoings $129 4 Outgoings $169 4 Outgoings $160 2,028 1 Outgoings $133.10 4 3 793 3 1,198 1P 3 Potential Total Vacancy 5,835sqm 2 Potential Total Vacancy 2,862sqm 2 Potential Total Vacancy 23,850sqm 823 M2 Potential Total Vacancy 10,000sqm 2 1 1 619 + 479 M1 1 NABERS 5 Star G NABERS 3.5 Star G NABERS 2 Star G NABERS 4.5 Star G LEGEND AVAILABLE 2017 AVAILABLE 2018 SUB LEASE Premium Grade Market Premium 56 55 54 53 52 51 50 49 48 Premium Grade Market Premium 47 47 46 46 45 45 44 44 43 43 42 42 41 1,036 41 40 40 39 39 38 38 38 37 37 37 36 36 36 35 35 35 34 34 34 33 33 33 101 COLLINS STREET 32 600 BOURKE STREET 915 32 530 COLLINS STREET 32 333 COLLINS STREET MELBOURNE 31 MELBOURNE 31 MELBOURNE 31 MELBOURNE 30 30 30 29 735 29 29 215 28 28 28 28 27 27 27 27 26 26 26 26 25 25 25 25 24 24 24 1,112 24 23 23 23 23 22 22 22 22 21 1,330 21 21 21 20 538 20 20 20 19 19 19 19 18 429 18 18 18 17 17 17 17 16 16 246 16 16 15 15 15 15 14 14 209 14 2,363 14 13 13 13 13 727 12 12 12 12 389 11 11 11 2,034 11 3,269 10 10 10 550 10 9 9 9 9 Typical Floorplate 1,400 - 1,800sqm 8 Typical Floorplate 1,400sqm 1,337 8 Typical Floorplate 1,260sqm 3,516 8 Typical Floorplate 3,446sqm 8 NLA 79,944sqm 7 NLA 64,427sqm 1,341 7 NLA 65,000sqm 3,516 7 NLA 62,336sqm 7 6 6 6 6 Asking Net Rent $490 - $730 5 Asking Net Rent $440 - $600 5 Asking Net Rent $425 - $450 5 Asking Net Rent $400+ 2,063 5 Outgoings $150 4 Outgoings $153 4 Outgoings $147 4 Outgoings $138 2,958 4 3 1,341 3 177 3 3 Potential Total Vacancy 4,600sqm 2 Potential Total Vacancy 9,002sqm 2 Potential Total Vacancy 8,413sqm 286 + 470 2 Potential Total Vacancy 8,117sqm 2 1 1 1 2,546 1 NABERS 4 Star G NABERS 3.5 Star G NABERS 5 Star G NABERS 4 Star G LEGEND AVAILABLE 2017 AVAILABLE 2018 MARCH 2017 SUB LEASE EASTERN CORE A-GRADE MARKET 52 51 50 A-GRADE MARKET SUMMARY 49 48 A-Grade Market 47 46 45 + Total NLA: 2,239,962sqm 44 43 + Total Direct Vacancy: 133,206sqm 42 41 40 + Total Sublease Vacancy: 10,455sqm 39 38 1,110 37 + Total Vacancy: 143,661sqm 1,110 36 1,112 35 35 1,112 34 34 + Vacancy Rate: 6.4% 33 33 35 COLLINS STREET 32 90 COLLINS STREET 80 COLLINS STREET 32 8 EXHIBITION STREET 32 MELBOURNE 31 MELBOURNE MELBOURNE 31 MELBOURNE 31 30 30 30 29 29 29 28 28 28 27 27 27 26 26 26 25 25 25 1,408 24 24 24 1,687 23 23 23 1,709 22 22 1,568 22 LEGEND 1,707 21 21 21 21 1,675 20 20 1,083 20 20 1,538 19 19 500 19 19 1,556 18 18 282 18 18 1,554 17 17 1,080 17 17 1,596 16 16 16 16 AVAILABLE 2017 1,600 15 15 1,080 15 15 1,600 14 14 1,080 14 1,617 14 1,600 13 13 1,080 13 850 13 1,601 12 12 1,080 12 1,618 12 1,599 11 11 1,080 11 11 1,601 10 10 1,080 10 10 AVAILABLE 2018 1,561 9 9 1,080 9 9 Typical Floorplate 1,600sqm 1,600 8 Typical Floorplate 881 - 1,348sqm 8 Typical Floorplate 1,078 - 1,171sqm 1,080 8 Typical Floorplate 1,568 - 1,687sqm 8 NLA 46,000sqm 1,599 7 NLA 21,200sqm 7 NLA 50,600sqm 1,080 7 NLA 44,900sqm 7 1,601 6 6 6 6 Asking Net Rent $490 - $600 1,601 5 Asking Net Rent $415 5 Asking Net Rent $500 5 Asking Net Rent $550 - $600 5 4 4 4