St Kilda Road commercial property update: Cityscope
The latest research from St Kilda Road Cityscope shows commercial property sales activity decreased in the past three months.
Sales recorded in the quarter ending April 2017 totalled $294.1 million from 367 sales, a decrease from the 162 sales totalling $409.5 million recorded to January 2017.
This data brings the 12-month total to $879.5 million from 747 sales, a slight increase from the $808.1 million from 709 sales recorded over the previous year.
The table below shows sales recorded for the past eight updates of St Kilda Road Cityscope.
Recent standout sales in St Kilda Road include:
- NLC Building at 102 Albert Road, South Melbourne, a six-storey office building with parking space for 106 cars on a site of 1,850 sqm, which was bought for $24.4 million;
- 9-11 Palmerston Crescent, South Melbourne, a two-storey concreate office building with five car parking spaces to the rear on a site of 488 sqm, which was bought for $5.5 million;
- Unit 3401 of Royal Domain Tower, at 368 St Kilda Road, Melbourne, a three bedroom easterly apartment located on level 34 of a 42-storey residential building completed in 2006, including two car parking spaces which were bought for approximately $3.36 million.
Properties for sale in St Kilda Road in April 2017 include:
- Units 706, 708, 709 and 710 of The Jewel, at 566 St Kilda Road, Melbourne, four commercial suites located on level seven of an eight-storey office building with two levels of underground parking, through Prime Property Partners Australia;
- Unit 403 at 434 St Kilda Road, Melbourne, a 63 sqm commercial suite located on level four of a seven-storey office building with basement and ground floor parking for 75 cars constructed in 1971, through CVA Property Consultants.
Significant leasing opportunities in St Kilda Road in April 2017 include:
- Tabcorp Building at 4-6 Bowen Crescent, Melbourne, a 14-storey office building with 5-level car parking area providing a total of 200 spaces, which has office space ranging from 1,000 to 8,225 sqm available through JLL Melbourne;
- Ansvar House at 432 St Kilda Road, Melbourne, a 13-storey office building with a 2-level, 124-space basement parking, which has office space ranging from 265 to 1,474 sqm available through JLL Melbourne; and
- VACC House at 464-466 St Kilda Road, Melbourne, a three and eight-storey office building designed in a stepped form with car parking for about 180 cars, which has office space ranging from 340 to 2,726 sqm available through Cushman & Wakefield.
A wave of residential conversion activity in the St Kilda Road precinct over the past two years has revitalised the suburb’s office market, with secondary stock replaced by an injection of fresh retail amenity according to CBRE Viewpoint.
It noted the future of office in the St Kilda Road precinct with the impact the withdrawal of 51,500sqm office accommodation for residential conversion has had over the past two years.
Over the past five years, prime vacancy in St Kilda Road has trended downwards off a peak of 14.2% in 2011, with a prime vacancy of 6.0% currently below the CBD average of 6.5%.
The decline in vacancy, coupled with growing tenant demand, helped drive a 2.5% increase in rents over 2016 and drop in incentives to 22%.
CBRE Advisory & Transaction Services – Office, Director, Anthony Park said the absorption of secondary assets in St Kilda Road had helped bring new life to the precinct.
“Furthermore as secondary office buildings are withdrawn from the market, it has forced remaining building owners to improve their assets to ensure they are well placed to meet the demands of the modern occupier.
“These improvements combined with the tightening of the market have seen solid face rent growth and the pulling back of incentive levels - resulting in healthy effective rental growth.”
The report shows two diverging stories between St Kilda Road’s prime and secondary grade office however, with the latter recording 17.2% vacancy.
CBRE Senior Research Analyst Anne Flaherty said a flight to quality and increased affordability of space in the CBD had supported the rise in secondary vacancy.
“Over the past five years, the additional cost to rent secondary grade space in the CBD over St Kilda Road has trended downwards,” Ms Flaherty said.
“However, this has also provided greater opportunities for developers, with 90% of the total 85,400sqm withdrawn over the past decade considered to be secondary space.”
Over the next three years, eight office buildings with a combined 56,000sqm of space will be withdrawn from St Kilda Road for residential conversion.
Despite the precinct seeing further withdrawals over the coming years, it would remain a key commercial office hub.
“A growing labour force, combined with shrinking supply should help to support lower vacancy and rent growth in the St Kilda Road market over the next five years,” Ms Flaherty added.