Colliers International sees steady rise in demand for sub-1,000sqm office space
A flurry of leasing activity is making its way through Melbourne CBD office buildings as the market experiences more demand for small, fitted space than it has seen in years.
According to Colliers International, the strong demand for sub-1,000sqm space that was witnessed at the end of 2014 has carried through into the first months of 2015.
Colliers International has recorded a 27% increase in sub-1,000sqm leasing deals in CBD (including St Kilda Road) in the first quarter of 2015, compared to the same period last year. The team currently has 72 leasing deals in the pipeline or forecasted for space under 1,000sqm.
“At the smaller end of the market we are seeing a noticeable increase in requirements for sub-1,000sqm space, particularly fitted space,” Colliers International’s Adam Davy said. “This is across the board, across all tenant sectors."
Mr Davy and colleagues Adam Shirley and Nick Serafini have negotiated a series of leases in the first quarter of 2015 which have seen landlord works seal the deal for many tenants.
Mr Serafini said actions spoke louder than words when it came to attracting tenants with the offer of fitouts and improvements.
“Demonstrated action makes a big difference to tenants, when there is something tangible that proves work is being undertaken,” he said. “Spaces that are ready to go and fully fitted, are resulting leases being signed, sealed and delivered with greater speed.
“We have had two leases – one for 100sqm and one for 63sqm – signed in the last two weeks for fitted space at 470 Collins Street.
“Both tenants had been looking around for a while and once they inspected these spaces they recognised that they wouldn’t be on the market for long. So they made offers quickly.
“This situation benefits owners immensely, as fitted space has significantly less down time than open plan space and, given tenants of this size usually sign two or three year leases, the fitout remains in a good condition for the next tenant."
At 520 Collins Street, AusPacific Group signed up to occupy 567sqm after the landlord actively approached them with a fitout plan to suit the space they were looking at leasing.
At 53 Queen Street, Uber Global recently leased 364sqm and All Star Comics committed to 590sqm.
“With 53 Queen Street having recently undergone a full refurbishment – including façade, ground lobby, air-conditioning, lifts and individual floors – these tenants thought the space presented extremely well,” Mr Shirley said. “The fact that the floorplates benefited from natural light to the front and rear was critical in the tenants’ decision-making processes.
“Most importantly, these two floors had the added benefit of being fully fitted, allowing Uber and AusPacific to move in quickly and also utilise their incentive as a rent-free period rather than a contribution towards a future fit out."
After just three weeks on the market, 84 William Street had received multiple enquiries and three offers, one of which has now signed leases after a competitive negotiation. Mr Davy said the high levels of interest were motivated by the offer of fitted space.
“The opportunity to secure a turn-key option, with a full fitout already in place, allows for a shorter lead time for move in from the tenant’s perspective as well as avoiding the capital investment in the fitout for the tenant’s business,” Mr Davy said.
“Down the road at 45 William Street the landlord is seeing the immediate benefits from doing works. Activity has significantly increased since undertaking the works with tenants now jumping at the chance to renew their leases.
“The lift lobby, bathrooms, ceiling grid and lighting have been upgraded, and tenancies have been subdivided.
“This kind of demonstrated landlord investment in a building not only attracts tenants but retains existing tenants."
Another prime example was Docklands’ World Trade Centre, which achieved 100 per cent occupancy in less than 12 months after building refurbishments commenced to upgrade the building.
520 Collins Street, Melbourne