Positive news for Melbourne’s commercial market

Office vacancies in the CBD fell in the last half of 2015, but not all areas are doing well.

According to Property Council of Australia research, vacancies actually increased in the south-west and north-eastern ends of the CBD, despite a drop of 0.4 per cent.

The south eastern corner of the city was the best performer in percentage terms – with vacancies falling from 5.7 per cent to just 3.4 per cent and a net absorption within the six-month period of 14,051sqm.

The best performer in square metres absorbed, however, was Docklands where new tenants took 16,067sqm off the books of commercial agents.  Docklands has a healthy 5 per cent office vacancy rate.

The area of the CBD between Russell and Elizabeth streets (which the Property Council calls the “Civic” precinct) has a respectable 4.6 vacancy rate (down from 5 per cent) but only absorbed 1770sqm during the study period.

And, while the “Eastern Core” absorbed about 14,000sqm, an equivalent amount came onto the market at the other end of town in the “Western Core”.  The vacancy rate here is currently 11.5 per cent and is even worse in the “Spencer” area where 15.3 per cent of office space is vacant.

Spencer actually enjoyed the most office take-up during the period (32,529sqm), but a further 45,069sqm was added to the market during the same period.

When introducing the new research to an industry breakfast on February 4, Victorian executive director of the Property Council, Jennifer Cunich, said: “Melbourne continues to host the second lowest vacancy rate amongst all of Australia’s CBDs.”

“A total of 71,768sqm of new stock is due to enter the market in 2016. No further space is in the pipeline in the short or medium term, although 466,637sqm is mooted for the market. During the last six months, supply additions grew by 45,069sqm while 929sqm was withdrawn. Net absorption was 55,857sqm,” she said.

Jennifer Cunich, used the occasion to caution the State Government over its planning reforms.
She predicted that planning reforms could scare away investors which would result in an end to Melbourne’s “enviable construction numbers” in 2017 and 2018.

“The Government’s C262 reforms are a well-intentioned attempt to change the nature of CBD development. They are noble in intention, but deeply flawed in execution,” Ms Cunich said.

“Melbourne is growing rapidly, and the Property Council knows full well what price our city will pay if liveability, amenity and design aesthetics are compromised by poor urban planning.”

“That being said, it is very important that government decision-makers at a state and local level understand what is at stake if their aspiration planning reforms fail.”

“Melbourne’s committed supply pipeline for 2017 is low. The C262 reforms have increased the likelihood that additional supply will be held back. If the Government is not careful, they may well find that 2017 and 2018 are the years in which Melbourne’s enviable construction numbers take an unexpected dive.”

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