Melbourne prime office space demand robust

Demand for office space in Melbourne’s central business district remains robust and may force rents to rise as vacancies drop and supply is limited.

There are no new major office buildings slated for the business district in the next three years although there are plans to renovate Australand's 357 Collins Street and Cromwell Group's 321 Exhibition Street.

''Not until the second half of 2013 do we expect to see significant additions of CBD supply enter the market via major builds,'' CBRE city sales manager Sebastian Drapac said. Some of the expected developments include NAB's Cbus tower and the Marsh/Mercer commitment to the Collins Square second tower.

Drapac added that CBD net absorption was positive although the five-year forecast average is not expected to be as strong as the previous years. The CB Richard Ellis report said that CBD forecast remained above long-term demand averages and except for 2013 when the CBD would account for the diminishing net supply forecast. It added that currently the CBD had 263,288 square meters of vacant stock or about 6.5 percent of total stock.

''As has been the case for the past 12 months, much of Melbourne's CBD net absorption will occur in Docklands, as developments continue to come on line with very high levels of precommitment,'' he added. ''With total vacancy at manageable levels and reducing in the short to medium term, the CBD's face rents generally remain firm with upward pressure mounting.”

He said: ''Melbourne's prime CBD face rents are expected to break through the $500-per-square-metre mark for the first time towards the beginning of 2013.”