LaSalle plugs a big hole on Exhibition St with government tenant
The Victorian government has quickly mopped up a 15,000-square-metre tenancy at a LaSalle Investment Management-owned office tower on Melbourne’s Exhibition Street.
The deal at 222 Exhibition Street comes as Melbourne’s vacancy rate in the office market hits a 10-year low of 3.6 per cent, the tightest of all the major markets.
Much of the new accommodation will be occupied by VicRoads, with a number of other government agencies also joining in the new lease.
The transaction was struck on net face rents in the low $600 to mid $600 range, according to market sources.
The new tenancy helps fill a large vacancy of around 20,000 square metres left as WorkSafe moved its headquarters to Geelong. WorkSafe opened its new offices there last month in a new building developed by Melbourne-based fund manager Quintessential Equity.
The empty space at 222 Exhibition Street – a landmark building acquired by LaSalle three years ago for $231 million from an AMP Capital fund – has been rapidly taken up.
The first big chunk of more than 5000 square metres was accounted for by co-working hub operator WeWork in June.
JLL and Knight Frank were appointed to handle the leasing space in the 30-level building at the northern end of the CBD.
JLL’s James Palmer declined to comment on the new state government tenancy on Monday.
The WeWork and state government moves into 222 Exhibition Street come after LaSalle completed a major refurbishment of the building.
The overhaul includes new end-of-trip facilities, a new commercial lobby, an expanded retail offering and sustainability upgrades.
That refurbishment is part of a broader trend that has seen landlords invest significantly more into refreshing space within their building that is used for collaborating and socialising.
“There is a genuine acceptance from building owners that the responsibility of the communal space component of buildings is being transferred to them from the tenant,” Stuart Colquhoun, JLL’s leasing head in Victoria, wrote in a JLL bulletin last month.
“They have been off the hook over the past five or so years because companies that have required flexible space to meet their changing requirements have turned to third party co-working providers.
“But tenants are increasingly recognising that they have no fallback if those spaces are full, or unavailable, and they’re saying ‘where is the space my landlord controls? How can I leverage the relationship with my landlord so there is always flexible space there for me when I need it?'”
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