Melbourne's Southbank has lowest vacancy rate in the country
Melbourne’s Southbank has the lowest vacancy rate – just 4.1 per cent – of all major Australian office markets, according to a new report from commercial agents Knight Frank.
The April vacancy rate in the fringe CBD market was less than half the 9.3 per cent recorded in January 2016 and follows a number of withdrawals of buildings for refurbishment or residential conversion.
At the same time Southbank has been starved of new supply with the completion of just one new building – Mirvac and ISPT’s 2 Riverside Quay, fully leased to PwC and architects Fender Katsalidis – in the past six years.
A 30,000-square-metre building is under construction but already pre-committed by the ABC with only two office buildings offering contiguous prime grade space in excess of 2000 square metres.
The lack of office space has lifted rents, with Knight Frank reporting that prime office rents have risen 14 per cent since January 2015 to currently average $490 per square metres, with incentives remaining stable and ranging between 25 and 30 per cent.
Knight Frank’s Kimberley Paterson said the fall in vacancy resulted largely from the withdrawal of five secondary grade buildings for conversion to residential, combined with a rebound in absorption of A-grade stock.
The current Southbank A-grade vacancy rate at 4.4 per cent is now below the long term average of 6.4 per cent. A notable A-grade leasing transaction in the second half of 2016 was CGI Technologies leasing 1289 square metres at 40 City Road.
Southbank outperformed the nearby St Kilda Road office market.
“Despite the ongoing withdrawal of stock, the vacancy for St Kilda Road has continued to climb but is forecast to fall from its current rate of 13.2 per cent to around 10.4 per cent over the next 12 to 18 months before rising again,” Ms Paterson said.
