Over 351,000 sqm of new and refurbished stock was injected into the Melbourne CBD market in 2020 and approximately 200,000 sqm in 2021. Coupled with the effects of the pandemic, this has seen the city's vacancy rate soar to around 12%.
However, the level of new supply expected to come online this year is relatively subdued, the majority of it being refurbished stock. The only new development set for completion in 2022 is 140 Lonsdale Street (part of Wesley Place), which is already 100% pre-committed.
Here's a breakdown of noteworthy projects and refurbishments currently under construction:
Located in the heart of the CBD, 140 Lonsdale Street will be an A-Grade commercial tower boasting 22,750 sqm of office space across 20 levels. Once completed, the premises will offer modern amenities, world-class end-of-trip facilities and technology-enabled workspaces.
The development forms part of the $1.5 billion Wesley Place precinct, which features three office buildings amidst the backdrop of public landscaped grounds, an array of on-site food and beverage options, the newly restored Wesley Place Church and four other heritage buildings.
The 555 Collins Street project will offer circa 84,000 sqm of premium grade office and 2,300sqm of quality retail space to be delivered across two stages.
Stage one will feature 48,000sqm over 34 floors and boast leading tech-enabled workspaces with touchless amenities.
Stage two will see the construction of a second tower (32,000sqm) with a typical floor plan of 1,300sqm.
The site has already attracted pre-commitments from Amazon (15,000sqm) and Aware Super (8,000sqm).
Located directly across from Southern Cross Station, Melbourne Quarter Tower will offer 34 levels of premium office space, accommodating approximately 15,000 employees.
The site will also offer 3,000 sqm of mixed retail, a wellness hub which will include childcare and allied health services, and is targeting a 6 Star Green Star rating, 6 Star NABERS energy rating and WELL Platinum Rating.
Medibank has already pre-committed to 17,500 sqm of the available space (22%) with the premises to become the company's new national headquarters.
Melbourne tenants continue to benefit from recent supply injections and high vacancy rates. Combine this with the high commercial sublease availability (over 100,000 sqm is currently up for grabs), and it's safe to say that vacancy rates in Melbourne will remain elevated for the foreseeable future.
Pre-pandemic, moving costs and a new fit-out would make tenants think twice about relocating. But now that size requirements are circa 20% less (hello hybrid working), and effective rents have plummeted, this is no longer the case. The market shift has created a competitive environment where tenants can relocate, install a new fit-out, and still come out on top.
Opportunistic tenants are taking advantage of these favourable market conditions to renegotiate terms in their existing space, or to relocate to a better building (either pouncing on quality fitted-out space at a reduced cost or having a new fit-out funded from a high incentive).
Even though the market has shifted in favour of the tenant, having a professional on your side pays off.
That's because, in our experience, commercial tenants who handle their own negotiations pay more over their lease term. After all, there's more than just rent and incentives to negotiate. In fact, there are over 40 points of negotiation, and glossing over them can result in significant problems down the line.
Tenant CS provides independent tenant representation services to our clients. We have the market knowledge to source the perfect office space for their needs and negotiate the best possible lease terms and conditions.
Contact us today to see how we can help you in your next relocation project or negotiation.
In any case, keep an eye on these and any other new developments that may come up. It's never too early to explore your options and plan for the future.