Sublease space fall but corporates still shrinking their offices

22nd July, 2015

Published: The Sydney Morning Herald, Nicole Lindsay.

The amount of offices space left vacant in the CBD by downsizing and shifting tenants dropped in the second quarter of 2105, with the finance industry showing the most improvement and technology sector yielding the most empty space.

The healthier subleasing rate suggests both stronger demand on the part of businesses moving into the city but also sustained 30 per cent incentive offered by landlords keen to get the space backfilled.

In Melbourne, subleasing deals by NEC and Porter Davis soaked up 8,400 square meters of space left empty when Medibank moved to a new building.

Nearly 7500 square metres of space will open up at 150 William Street when Maddocks Lawyers moves to Lang Walker’s Collins Square.

Research by CBRE shows the total amount of available sublease space in Melbourne fell by 10.3 per cent to 75,800 square metres. Across Australia, it fell by between 14 per cent and 22 per cent in Sydney and a staggering 59 per cent decline in Canberra as the federal government reassessed its office portfolio.

Corporates downsizing their workforce were responsible for most of the vacancy. Premium and A-grade space made up 74 per cent of the available sublease space, whereas vacant B-grade space was triggered by relocating tenants.

CBRE agent director of office services Andrew Tracey said the improving conditions reflected increasing occupier demand and improving business confidence levels.

But the improvement was dependant on particular sectors, Mr Tracey said.

“Sublease availability in the finance and insurance sectors has dropped by almost 50 per cent and they were previously the largest provider of space. That position is now held by the IT sector with 18,000 square metres available,” he said.

Some building owners are upgrading and refurbishing space to help attract new tenants. A string of deals covering 15,400 square metres of space at 120 Collins Street has followed a refurbishment program.

New tenants have signed up to the city’s tallest office building, including Schwartz-family owned boutique investment bank Qualitas, online betting group CrownBet, Property Partners, Centuria Capital, Moelis & Company and the Royal Bank of Canada.

And in the suburbs, Prattcorp’s PCL has achieved nearly 100 per cent occupancy at 818 Whitehorse Road, Box Hill after extensive redevelopment.

Colliers International agents Damien Adkins and Michael Darvell, with Gordon Kelly from Kelly & Kelly Property negotiated new leases for 5200 square meters of the 6000-square-metre building, which is about 30 years old.

Mr Adkins said a new façade and bigger floor plates were created during a 12-month redevelopment plan.

“Everything in the building is now brand new, including the lifts, ceilings and air-conditioning,” he said.

New tenants in the building include Telstra, Australian Aged Care, Flexera Software, Regus, Australian Unity and Hillross.