The Melbourne metropolitan office market will continue to perform strongly in 2018, according to Rob Joyes, Colliers International National Director of Office Leasing.
“This is largely due to the tight vacancy rate and increasing effective rents across the Melbourne CBD – which in turn is driving rental growth in metro markets,” Mr Joyes said.
“City fringe precincts are highly desirable alternative locations to the CBD, as there is limited compromise in terms of retail amenity and accessibility to public transport.
“Richmond, South Yarra, Collingwood, Kensington and South Melbourne all have large scale commercial projects either underway or with development approvals in place and will be well positioned to capture the 13% increase in demand from tenants looking to create a point of difference from their competitors in the highly aggressive battle for talent.
“The vacancy rate in the City Fringe market is currently 2.95%, which is the lowest rate Colliers International has ever recorded in this market.
“We don’t expect vacancy to get back to long term average levels (circa 6.1%) until late 2019, which leaves a further two years of likely strong effective rental growth to occur.
“Whilst the Outer East business parks have weathered several years of strong supply, this is now quickly being absorbed, as all markets around Melbourne tighten and tenant options are quickly reducing.
“Several developers who anticipated the tightening supply of A grade stock in this region will be rewarded this year, with some likely to achieve 100% building occupancy at practical completion. Salta's Nexus Corporate Park is an example of this.
“The B grade market will also improve as the vacancy rate rebalances itself below double digit levels.”