Joyes said new office fitouts have inverted from the pre-pandemic norm in which 60 per cent of space was taken up by workstations and 40 per cent dedicated to ‘breakout’ or meeting spaces. Now companies are devoting at least 60 percent of layout space to collaborative team building areas, he said.
Cremorne, a tiny inner-fringe suburb stacked with old brick warehouses and fresh new offices, is a magnet for technology and creative companies and has avoided the plague of empty offices facing Melbourne’s CBD landlords.
Colliers’ associate research director Jodi Birch said six monthly net absorptions, the increase in occupied space (or demand) was around 61,000 sq m over the past two six-monthly periods, a figure much higher than Melbourne’s CBD.
“It’s a great sign for this market, with vacancy dropping back over the year,” she said.
Other developers have also had leasing success. Salta and Abacus Property Group’s Industry Lanes project at 459 Church Street has attracted multiple new tenants, including pharmaceutical firm Arrotex, advertising brand M&C Saatchi and pub landlord Endeavor Group, Joyce said.
Average net face rents are between $620 and $640 per sq m for premium buildings.
Vicland’s development director Jake Steinhart said several CBD-based firms had moved to its Toorak project, giving it confidence in the strength of leasing demand.
“It’s hard to find a site of this size so close to Richmond train station. It’s probably the best development site I’ve come across in the area,” Steinhart said about the new Cremorne project, which will have floor plates ranging between 700 and 2500 sq m.
Curtis York co-founder James Way said small businesses are hunting for floor plates between 200 and 300 sq m.
“We’ve noticed there’s real depth at that end of the market,” he said. “We don’t think our space in the market is oversupplied or saturated.”
Both its new $17 million six-storey building in Cubitt Street and its Prahran office are speculatively built, with no pre-commitments from tenants.
Prahran rents were about $580 per sq m, while inquiry for Cremorne is around $650 to $700 a sq m, he said.
Managing rising construction costs and debt is a priority. “You have to have your eyes wide open. There are some challenges out there,” he said.
Both developers intend to hold on to their projects when they are complete.