Demand for small office space in Melbourne CBD skyrockets

Small business confidence and creative thinking by CBD landlords have driven a 235% increase in demand for small office space in Melbourne, says Colliers International.

The firm reported a year-on-year increase in demand for sub-300 square metre office suites in the Melbourne CBD.

“This accelerated demand highlights the strength in sentiment among small business owners,” Colliers International’s Milly Stockdale said.

“We received 748 enquiries for small suites over the past financial year FY 2017/2018, compared to 318 enquiries from FY 2016/2017. This equates to 2.3 times the demand, year on year.

“This demand has also flowed through to leasing activity, with Colliers International concluding over 100 deals for space under 300 square metres in Melbourne’s CBD year to date, compared to less than 70 at the same time last year.

“Over the next 12 months, there is only 115,000 square metres of new supply space and over 81,000 square metres of backfill space due to be added to the Melbourne CBD market. This means vacancy rates will continue to tighten, providing competitive tenant conditions.”

The lack of upcoming supply is causing tenants to commit to space to ensure that they don’t miss out on a quality address, it says.  

Strong population and job growth in Melbourne is supporting rental growth and a healthy environment for small businesses to expand.

In the recent deal, a2m Consulting secured its first CBD office, leasing 132 square metres at Suleman Group’s 470 Collins Street in a deal negotiated by Stockdale and colleague Brigitte Doupe. 

“Many iconic CBD buildings are choosing to execute a small suite strategy on vacant whole floors, due to the uptake in the market and effective net rental growth and minimal downtime,” Doupe said.

“Recent activity at 470 Collins Street – where we have negotiated 10 sub-400 square metres leasing deals in the last eight months – is a prime example of this.”

“This trend has also been recently demonstrated at 360 Collins Street, where Colliers International has secured 23 tenants under 400 square metres in the last 18 months for Dexus Property,” Colliers International’s Adam Davy said.

“This growth in demand can be attributed to several factors, including the strength in sentiment among small businesses, and the Melbourne economy supporting small business growth.”

Doupe said small businesses were jumping at the chance to secure CBD space which would see them benefit from easy access, quality of amenity and proximity to clients and stakeholders.

Additional leases at 470 Collins Street have included:

-          Cherub Consulting (45.4 square metres)

-          Javadi (52.3 square metres)

-          Efex Group (40 square metres)

-          Endeavour Conultants (63.4 square metres)

-          Australian Institue of Engineering & Technology (139.1 square metres)

-          Jaythorm (147.80 square metres)

-          United Almonds (100.4 square metres)

-          Austudy (209 square metres)

-          Egali (85 square metres)

-          Unify Solutions (96.4 square metres)