Confidence drives small office demand
Increased small business confidence and creative thinking by CBD landlords have driven a 235 per cent 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 sqm office suites in the 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 2017/18, compared to 318 enquiries from 2016/17. 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 sqm 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 sqm of new supply space and over 81,000 sqm 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, Colliers said.
Strong population and job growth in Melbourne is supporting rental growth and a healthy environment for small businesses to expand.
“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,” Brigitte Doupe said.
“Recent activity at 470 Collins St, where we have negotiated 10 sub-400 sqm leasing deals in the last eight months, is a prime example of this.”
“This trend has also been recently demonstrated at 360 Collins St, where Colliers International has secured 23 tenants under 400 sqm in the last 18 months for Dexus Property,” 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.”
Ms 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.