New city fringe office hot spot set to capture ‘work, live, play’ lifestyle
According to Colliers International research, there is 80,000sqm of upcoming space in the South Yarra commercial market over three projects, with a pipeline until 2023.
The largest injection of new office space will be an additional 50,000sqm over four buildings at the new-look Jam Factory, being developed by Newmark Capital.
An estimated 4,000sqm will be added at Chapel Plaza (402 Chapel Street) and another 25,000sqm at Goldfields Group’s 627 Chapel Street which will comprise 25,000sqm of office space.
“No substantial office building over 4,000sqm 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,” Rob Joyes, Colliers International National Director of Office Leasing, said.
“In recent years, large occupiers of 4,000sqm-plus have had to focus on other city fringe areas such as Richmond and Cremorne due to a lack of options in South Yarra.
“Led by the rejuvenation of the Jam Factory, these new projects will open the door for large occupiers to position themselves in this tightly held precinct.”
According to Colliers International, South Yarra’s net lettable area was 97,000sqm at March 2019.
“An 80,000sqm investment in new office space will result in the doubling of this boutique commercial precinct and turn it into one of the next city fringe office hot spots,” Colliers International Research Manager Sarah Walker said.
“ An analysis of historic office demand in the CBD shows that for every new head of population, 0.9sqm of office space is demanded. Up until about 2015, office supply in the Melbourne CBD broadly kept pace with population growth.
“Since that time, however, 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.
“ Based on ABS forecasts, as well as Colliers’ own analysis of future office supply, this supply/demand imbalance is forecast to become even greater and the undersupply in the CBD will 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 is currently at just under 4.5%, and has been sub-4.5% for two years now. Coupled with the very low vacancy in the CBD, and a forecast for continued low vacancy, upcoming supply in the City Fringe is expected to be met favourably by Melbourne occupiers.”
Mr 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,” he said. “The Jam Factory in particular is set to capture this demand and be snapped up by savvy businesses looking to attract and retain the best staff. This once in a generation development will truly unlock the full potential of this commanding 1.8ha site in one of Melbourne’s fastest growing and most afluent suburbs.
“Occupiers of the Jam Factory will also be able to take advantage of a new dedicated pedestrian connection linking the development to South Yarra railway station, one of the busiest train stations outside the Melbourne CBD.”
Jonathan Bradhurst , Newmark Capital Project Director, said The Jam Factory was at the focal point of South Yarra’s vibrant lifestyle precinct fueled by innovation, creative industry and its young and afluent demographic.
“South Yarra continues to evolve, on trend, with an exciting lineup of new apartments, food halls, restaurants and gyms in the pipeline,” Mr Bradhurst said. “Businesses across the spectrum of culinary, physical fitness and wellness and entertainment 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.”
Jonathan Isaacs, of the Clemenger Group, said South Yarra was an ideal fit for businesses looking to provide work-life balance in close proximity to the CBD and an abundance of amenity.
“We’re proud to base some of the Clemenger Group’s businesses in South Yarra because our employees love to work here,” he said. “Our agencies get to form a part of the creative precinct along Chapel Street, and the competitive overheads mean we can invest in contemporary, exciting office fit-outs that reflect the businesses they house.”