Demand for Melbourne office space remains high

Business and, to a lesser extent, consumer confidence is rebounding in Australia, particularly since Malcolm Turnbull has injected a more positive and economically progressive leadership style in his new position as Australian Prime Minister. Office leasing markets are set to benefit, with tenants in the IT and Communications sector continuing to drive tenant demand in 2016.

Andrew Beasley, Colliers International National Director of Office Leasing, said some rental growth was expected in the Melbourne CBD office market in 2016.

“Current figures show an average 6% annual increase in premium rents, 5% in A Grade rents and 6.5% in B Grade rents, so we are starting to see some really good year-on-year growth,” Mr Beasley said.

“Despite being spoilt for choice as 2015 drew to a close, with a late scurry of activity in December by larger tenants, options for stock on the market in the year ahead are tightening. We will see limited supply coming online this year (2016) while general demand remains high."

Colliers International forecasts office vacancy will peak at around 8.4% in the Melbourne CBD in early 2017.

Mr Beasley said strong demand for creative space would continue in 2016, with building quality and tenancy presentation remaining crucial to attracting and retaining tenants.

“Tenants will continue to be attracted to a good value proposition and will act fast on deal opportunities,” he said. “We will see a real flight to quality among opportunistic tenants, while incentives will remain important in stimulating demand and encouraging relocations."

In Melbourne’s metropolitan office market, vacancy will continue to tighten throughout 2016 – particularly in the highly sought after city fringe and inner east locations.

“Investors will be aggressively pursuing office investment opportunities as they present a secure alternative to the unpredictable equity markets,” Rob Joyes, Colliers International National Director of Office Leasing & Investment Services, said.

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