At the turn of the decade, a fear that office spaces had become unfashionable was starting to take hold. But new data and a cluster of recently signed leases indicate that office spaces are returning to prominence, and are not just a relic of a bygone era.
As the Melbourne CBD’s occupancy rate jumped from 36% to 48% this past month, Fitzroys announced new leases for some key buildings, including the historic 174 Collins Street, and the high-exposure two-storey building at 400 Spencer Street. Both are emblematic of some of the major trends currently perceptible in the office sector.
“Many tenants are looking for space from circa 150 sqm to 300 sqm, particularly space that is fully-fitted or has a brand-new spec fit-out,” stated Fitzroys’ Hamish Dennis. “Tenants are looking to plug and play.”
Dennis and fellow agent Stephen Land served as the team who secured the $70,000 per annum lease for levels 6 and 7 of 174 Collins Street, and they have found that offices with more compact space offerings are proving popular in a market where tenants are trying to avoid paying for unused space.
“Smaller offices are conducive to a smaller capital outlay at a time in which not all staff are expected to be in the office at all times.”
Taking over the lease is Wilkinson Publishing, a family-owned, independent publisher based in Melbourne. They have signed on to occupy 206 sqm across the two levels, over a long 6+6-year term.
400 Spencer Street, West Melbourne, VIC 3003
Meanwhilst, education group Gnosis secured a 2+2-year lease for the building at 400 Spencer Street, on the corner of Batman Street. Struck at $130,000 per annum, this deal is further evidence of the education sector's move back into the CBD, as international travel becomes more frequent.
“The northern precinct of Melbourne’s CBD is home to RMIT University, the University of Melbourne and a number of other tertiary campuses, and over time has been shaped by the heavy student presence. The tenant has made their move in anticipation of the return of international students in the coming months.”
That was the message from the aforementioned Stephen Land back in December of 2021, subsequent to him negotiating a lease for a self-contained office space out of 380 Elizabeth Street on behalf of a private owner. The messaging remains accurate, as evidenced by Gnosis's signing.
According to Mr. Dennis, enquiries for the property came predominantly from education groups, as well as hospitality groups looking to transform the building back into its original state as a pub and restaurant. Recently, the site had been converted from a tavern into a 9B-certified building with lecture theatres by the Menzies Institute of Technology, who were owner-occupiers. After they sold the property to Shangyi Property Group, further refurbishment was completed.
If both 174 Collins Street and 400 Spencer Street are representative of anything, it’s that inner-city office space is starting to become as coveted as it was prior to COVID. In contrast with the expectations espoused by some industry pundits in early 2021, this sector is bouncing back, and doing so at a very high pace.
