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Office becomes resi becomes office

Property Markets / Planning, Zoning, Infrastructure

Australia / Melbourne

Nov 27 2018

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Dramatically changing market forces have spawned a new breed of commercial building chameleons across Melbourne with plans to turn offices into apartments being abandoned in favor of returning to office space.

According to CBRE National Director Investments Mark Wizel, while the long term prospects for large scale residential projects remain positive Melbourne’s booming office market has made office development the compelling shorter term alternative.

``Residential is in a cyclic downturn but make no mistake it will recover as Melbourne’s population continues to outpace the rest of Australia’s capitals, however currently the case for office development is extremely good with solid rental growth, reducing incentives, and vacancy, at 3.6 per cent, at its lowest point in a decade.

``We are also talking about delivering new office stock into not only Australia’s fastest growing city but also the best performing economy nationally.

``That augurs well for continued growth in the market as the economy drives jobs growth and increasing demand for office space,’’ Mr Wizel said.

According to the latest ABS data (November 15) Victoria’s annual growth in trend employment stood at 2.6 per cent with 30.5 per cent of the 20,300 average monthly increase in employed full-time persons nationally over the past 25 months. At September the unemployment rate stood at 4.5 per cent, the lowest rate in seven years. 

Mr Wizel said Melbourne’s cheaper office rents, more affordable housing and generally lower cost of living, was also attracting office tenants away from the Sydney market. 

``The attraction to set up in Melbourne has always been there but there is no doubt that Sydney’s eye-watering cost of housing, in particular, is arguably having a greater impact than has hitherto been the case.   

``As a consequence of a number factors the demand for office development sites in the last couple of months has been off the charts and, with the current shortage of available sites, land values are really under pressure especially for well-located sites where a reasonable size floor plate can be achieved,’’ Mr Wizel said.

He said he expected the office development site market to continue to tighten into the new year as work began and continued on some of the biggest infrastructure projects in Victoria’s history including the $16 billion North East Link and the $11 billion Metro Tunnel projects.


Some of Melbourne’s building chameleons

Property

 

Original building   

Resi

project

New office project

Developer

Sale price/land rate

555 Collins

Enterprise House office tower

625 apartments

Major office development mooted

Charter Hall

$62,472sqm

383 La Trobe

Melbourne Mint B Grade office

200 hotel rooms and 500 apartments

Plans for 40,000sqm office tower

Mirvac

$42,822sqm

200-216 Victoria Parade

Two office buildings

Purchased for apartment  project

Plans for 26,000sqm office building

Golden Age/Time & Place JV

$17,958sqm

SOURCE:

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