East Melbourne office space experiences lowest vacancy rate in Australia

Office space in East Melbourne is in popular demand from boutique consultancies, resulting in the lowest office vacancy rate in Australia of 3%.

East Melbourne offers 183,781 square metres of office space but currently has a direct vacancy rate of 2.2%.

The demand for office space is exceeding the space available; however there has been no increase in supply since the first half of 2009 and no new supply is in the pipeline.

West Perth is the only suburb that comes close to equaling East Melbourne’s current vacancy with a vacancy rate of 4.5%, according to the latest PCA data.

Savills Australia’s senior leasing executive Louise Nicoll says the area has always been popular with a constant stream of enquiry but there was never an overload of enquiry.

“Ironically, the fact that there isn’t any space available, only seems to make it even more desirable and that has intensified the demand,” says Nicoll.

“East Melbourne is not a big market but it has a lot to offer in terms of its location on the doorstep of the CBD.”

Nicholl says the suburb’s architecture and overall character and ambiance is a major draw card.

East Melbourne contains some of Victoria’s oldest homes, parks and gardens.

The most famous office building is the ICI house located at one Nicholson Street, which was completed in 1958.

Melbourne based private investor Brendan Sullivan recently leased a whole floor at his 126 Wellington Parade building opposite the MCG.

“The space had a cool makeover to appeal to the boutique market, but enquiry is always good in this market and in this case was really quite remarkable,” says Sullivan.

Sullivan says the floor received several offers and leased very quickly.

Both domestic and offshore buyers are realizing now is the time to buy investment properties within the metropolitan office market due to tightening vacancy rates, low levels of new supply and steady rental growth.

“Astute investors, particularly cashed-up private investors and syndicates, have begun to take notice of the strong fundamentals that many of these markets have to offers,” says Colliers managing director of capital markets and investment sales John Marasco.

There was more than $2.3 billion worth of investment transactions within the metropolitan office markets in 2012 – the strongest result since 2007, according to Colliers latest Metropolitan Office Research & Forecast report.

“This scenario is likely to continue until developers and financiers gain more confidence to develop and the next supply cycle begins,” says Marasco.

Melbourne remains a domestic buyers market with no foreign purchasers in 2012.