Colliers International report finds 32% increase in enquiry from 2017
The second quarter of 2018 has highlighted an unprecedented level of demand for Melbourne office space compared to previous years, according to the latest Office Demand Index released by Colliers International.
According to the report, Melbourne recorded 274,335 sqm of demand in Q2 2018 – a 32% increase in (per sqm) compared to Q1 2018.
“Melbourne witnessed an increase in demand for space over 3,000sqm by 97% - or an additional 78,000sqm – when comparing Q2 2018 to Q1 2018,” Sarah Walker, Colliers International Victorian Research Manager, said.
“A major driver for this is the increase in Victoria’s population driving growth in employment – full time employment in Victoria grew by just over 40,000 jobs last year,” Ms Walker said. “Job vacancy data provided by the ABS, which is a good leading indicator of demand, has accelerated dramatically in Victoria over the past year.
“There are now 67,600 jobs vacant in Victoria, up from 44,600 available jobs in May 2017. This represents a 52% increase in jobs available over the past year, and the series is as high as it has ever been since it began in 2009.
“Over the next 12 months, there is only 115,000sqm of new supply space and over 81,000sqm of backfill space due to be added to the market. However, of the 115,000sqm of new supply, the vast majority is already committed.
“Coupled with very strong take up of the limited existing space on the market, we expect that CBD vacancy will decrease further until more stock enters the market in 2020.”
Strong demand was driven largely by a consistent increase in small suite enquiry in the Melbourne CBD.
“Q2 2018 represents a 32% increase in demand (per sqm) compared to Q1 2018 and an impressive 44% increase in small suite demand when compared to Q2 2017,” Ms Walker said. “This has also been reflected in our Melbourne CBD deals year to date.”
There was also a considerable increase in demand reported in Melbourne’s City Fringe office market, as the vacancy rate in this area also continues to decline.
“The City Fringe market is showing the second lowest vacancy rate in major office markets nationally, decreasing from 6.73% at March 2016 to 3.29% at March 2018,” Travis Myerscough, Colliers International National Director of Office Leasing, said.
“This is influenced by an increase in amenity in this area and the quality of new developments and infrastructure coming into the City Fringe, as well as the lifestyle it offers for tenants and staff.”