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Lack of strata office supply to fuel continued strong demand in 2019

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Lack of strata office supply to fuel continued strong demand in 2019

Colliers International, MAB Corporation field early interest in exceptional strata development recently on market, Escala Workspaces NewQuay

Melbourne, January, 31st 2019 –  A shortage of stock and continued demand for strata office in the Melbourne CBD and City Fringe is expected to fuel an increase in values and strong competition for assets in 2019.

“Strata office continued to be an extremely sought-after product in the commercial property market in 2018 simply because of its rare and limited nature,” Colliers International’s Chris Ling said.

“Owner occupiers continued to dominate and outbid investors as businesses looked to relocate and move in closer to the Melbourne CBD and CBD fringe to take advantage of Melbourne’s infrastructure growth, which will continue to improve accessibility for workers, as well as the general public.”

Colliers International found strata office sales totalled $86.5million in 2018 in the Melbourne CBD and Docklands precinct, a decline in transaction volume compared to 2017’s $116million figure.

“The tightly held nature of the asset class has been a major factor in this decline, with many owners occupying for a longer term,” Mr Ling said. “With limited forecast supply in the CBD, we expect this trend to continue in 2019 as pent-up demand fuels capital growth and the compression of yields.”

Colliers International’s Anthony Kirwan said strong demand for CBD strata property was being further driven by a low strata vacancy of 3.1% and continued increase in net effective rents in this market.

“As interest rates remain at an all time low many buyers are opting to ‘owner occupy’ their office premises as a more financially viable option with the added benefit of having certainty over their office requirements.

“Given the lack of current available stock, and the fact there is only one new specialised strata development on the horizon, we expect to see a continued increase in values and compression of strata office yields as vacancy tightens throughout 2019,” Mr Kirwan said.

The only strata office development to hit the market in recent months is MAB Corporation’s new creative, flexible office concept, Escala Workspaces in NewQuay, Docklands.

The project will comprise 1,680sqm of unique commercial space with 1,260sqm of office space over three levels attracting rates of up to $8,000/sqm compared to CBD strata properties that are consistently exceeding $10,000/sqm. Escala Workspaces has a strong emphasis on health and well being facilities for future workers and is further complemented by 420sqm of retail space on the ground floor. Office spaces will range from 60sqm to 450sqm for a whole floor, while retail spaces range from 73sqm to 150sqm.

Designed by award-winning local architects Six Degrees, Escala Workspaces has an eye-catching warehouse brick design anchored by a north-facing public piazza with a ground floor food and beverage offering.

MAB has appointed Colliers International’s Chris Ling, Anthony Kirwan and Martin Leong to market the space. Mr Ling said Escala Workspaces would offer a serious point of difference for SME’s using vertical scale as the driving concept.

“Escala Workspaces  is a unique offering of commercial spaces featuring 5m+ ceilings and soaring arch windows, creating light-filled spaces that boast enormous flexibility and are reminiscent of Melbourne’s grand, 19th Century warehouses,” Mr Ling said.

“We have received great early interest in the project, fielding the majority of enquiries from local owner occupiers looking to secure their future office requirements and take advantage of the low interest rate environment. Ownership also provides businesses with long term security and the flexibility to optimise and alter the office as their needs change or grow.

“Additionally, investors, both local and offshore, have been attracted to a brand new product offering significant depreciation benefits and positively geared investments. MAB estimates yields between 7 – 7.5% are possible for enterprising landlords who wish to optimise the floor space.”

One of the standout strata office transactions in 2018 was the sale of Level 5, 100 Collins Street which sold for $3.45million at a rate of $12,591/sqm.

“This off-market transaction achieved over 10% capital growth in six months, selling on a yield of 4.9% to a local private investor,” Colliers International’s Martin Leong said.

“Other notable transactions included the         sale of 18 separate strata offices at 224 La Trobe Street off-the-plan, on an average price of $10,300/sqm, to a range of purchasers including offshore investors, local owner-occupiers, local investors and self-managed super funds.”

“There was strong demand for this property due to the limited supply of new inner CBD strata office developments.”

Expressions of Interest for Escala Workspaces close 2pm Friday 22nd March, 2019.

 

About Colliers International

Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is an industry leading global real estate services company with more than 16,000 skilled professionals operating in 66 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting.

Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice that help clients accelerate their success. Colliers has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals’ Global Outsourcing for 11 consecutive years, more than any other real estate services firm.

Founded in Australia in 1976, Colliers International is the largest locally formed real estate services firm with professionals worldwide.  Find out more at http://www.colliers.com.au/

For the latest news from Colliers International, visit:  Australia – colliers.com.au/news │ International – colliers.com/news, follow us on Twitter: Australia – @ColliersIntAust  │ International – @ColliersIntl, or visit us on LinkedIn: Australia or International.

 

About MAB Corporation and NewQuay

MAB Corporation (MAB) is a privately owned property development company that has been successfully operating since 1995.

Established and owned by fifth generation Melbourne property identities, Michael and Andrew Buxton, MAB has activities in residential, retail, business parks and commercial developments, as well as an investment management business. By daring to imagine such visionary projects as NewQuay-Docklands, University Hill, and Merrifield MAB is playing a significant role in reshaping the environments in which we live, work and play.

NewQuay offers the best of Melbourne: waterfront restaurants, business hubs, major transport links and spectacular views of the city. In 1999, MAB Corporation founders, Michael and Andrew Buxton, boldly imagined something remarkable for Melbourne. Their vision was to transform Melbourne’s disused and desolate harbour frontage into a sophisticated waterfront precinct of a world-class standard.

NewQuay is now a spectacular reality, truly warranting the $2.5 billion invested to date: a thriving waterfront precinct that continues to evolve, true to its 24-hour vision.

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