Supply tightens as demand stimulates rental growth in popular commercial precinct
Increased residential development in Box Hill’s popular Prospect Street commercial precinct is driving office tenants to new locations within the area.
According to Colliers International’s Rob Joyes, the current boom in residential development in Box Hill has resulted in a significant amount of commercial office space being removed from the market.
This has resulted in fewer options in the traditional office hot spot at the Prospect Street end of Whitehorse Road.
“Similar to the transition we are seeing along the St Kilda Road boulevard, office space is being taken out of the market following an increase in residential development along Whitehorse Road,” Mr Joyes said.
“We have estimated around 12,000sqm of office space has been removed from the office market for residential conversion along a 300m stretch of frontage to Whitehorse Road over the last 12 months, leaving a total supply of approximately 140,000sqm in Box Hill currently.
“With these withdrawals and strong net absorption driven by significant leasing activity in recent months, we are starting to see the stimulation of some rental growth in this office market,” Mr Joyes said. “A Grade office rents have increased from about $280/sqm (net) two years ago to around $330-$340/sqm (net) currently."
A Grade options in Box Hill were limited to one building – the ex-Australian Tax Office building located at 990 Whitehorse Road. The building, owned by Glorious Sun, recently benefited from an extensive refurbishment and re-positioning.
Mr Joyes said around 30% of the building was currently leased, following a major lease to Serco for 4,000sqm negotiated by Colliers International at the end of 2015. Approximately 14,000sqm was still available for lease.
“This is the only refurbished A Grade office building in Box Hill, which makes it ideally positioned to cater to the pent up demand from tenants in this tightly held market,” Mr Joyes said.
“Considering the mixed use nature of the site and the significant development going up along Whitehorse Road, we are finding many tenants are looking to relocate from the Prospect Street pocket nearby into the Australian Tax Office building as the wider precinct becomes a bit diluted.
“The change in use of the Prospect Street commercial precinct with increased residential development is encouraging office tenants to consider finding themselves another location within the Box Hill market, and the ATO building is well positioned to take advantage of that.”
Above: 990 Whitehorse Road