Pellicano speculates on office needs in south-east
The group will move to fill a perceived shortage of office space in the prime bayside market despite little or no other speculative development activity taking place, joint managing director Nando Pellicano said.
The 3600-square-metre office (artist's impression, right) will cost $11 million to build and is in Moorabbin's Parkview Estate. It will rise three levels and have a 5 star NABERS Energy Rating, using innovative gas-fired airconditioning.
"Bayside tenants looking for whole-floor or whole-of-building tenancies up to 3600 square metres have limited quality options to choose from in the current market," Mr Pellicano said.
The estate had a critical mass of 5000 sq m of occupied space across four buildings with more than 3000 people and 60 businesses, he said. There were not many options for tenants looking for new space.
"We're confident in the area and product we're delivering," Mr Pellicano said.
Colliers International's Rob Joyes said because of the downturn there were no other speculative developments in the suburban office market apart from space Goodman Group and Salter had included in buildings they had already pre-leased.
Businesses were unwilling to move unless they could save costs and there was a trend towards tenants rationalising and reducing floor space, Mr Joyes said.
"I've seen tenants rationalise floor area by up to 40 per cent. As a result they're able to pay more for space in a better-quality building," he said.
Schneider Electric had recently moved to Goodman's Ferntree Business Park, reducing its floor area from 9000 to 6000 sq m; and United Energy consolidated two sites into one office in Salta's Nexus business park, reducing its floor area by half to 2500 sq m, Mr Joyes said.
The development pipeline for suburban offices was expected to increase this year more than in the previous two years but new supply was still below long-term averages, a recent report from Knight Frank suggests.
"Despite uncertain economic conditions, tenant demand remains solid in the suburban office market with net absorption positive in the six months to April," Knight Frank's May Melbourne Suburban Office Market Overview states.
Vacancy rates fell from 6.4 per cent to 5.4 per cent in the six months to April, it said.
"Melbourne's suburban office market remains one of the tightest office markets, not just in Victoria, but nationally," the report says.
The lean amount of new supply coming on has effectively been underpinned by government-entity backed projects for the Australian Taxation Office, South East Water and City West Water, it said.
sjohanson@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
Pellicano Group has started a speculative suburban office building in Moorabbin's Parkview Estate in Melbourne's south‑eastern suburbs. The development is a three‑level office of about 3,600 square metres and is being built at an estimated cost of $11 million.
Pellicano says there is a perceived shortage of quality whole‑floor or whole‑building options in the prime bayside market. The Parkview Estate already has around 5,000 sqm of occupied space across four buildings with more than 3,000 people and 60 businesses, so the group is confident there will be demand for the new product.
According to Colliers International's Rob Joyes, the market downturn has meant there are few other speculative suburban office developments. The only speculative space noted has been space Goodman Group and Salta (Salter) included within buildings they had already pre‑leased, so Pellicano's standalone speculative build bucks the broader trend.
Knight Frank reported that vacancy rates fell from 6.4% to 5.4% in the six months to April, and net absorption was positive in that period. The report describes Melbourne's suburban office market as one of the tightest nationally, with tenant demand remaining solid despite uncertain economic conditions.
Many businesses have been rationalising and reducing floor space. Colliers' Rob Joyes said tenants have cut area by as much as 40% in some cases. Examples in the article include Schneider Electric reducing from 9,000 to 6,000 sqm, and United Energy consolidating two sites into one and reducing its space by half to about 2,500 sqm.
The Pellicano building is designed to achieve a 5‑star NABERS Energy Rating and will use an innovative gas‑fired air‑conditioning system, indicating a focus on energy performance and higher‑quality building services.
Knight Frank suggested the suburban office development pipeline is expected to increase this year more than in the previous two years, but overall new supply is still below long‑term averages. Some of the lean new supply has been driven by government‑backed projects for entities such as the Australian Taxation Office, South East Water and City West Water.
The article highlights mixed signals: tenant demand and falling vacancy rates point to strength, but the market has seen caution with few speculative builds and tenants reluctant to move unless they can cut costs. Investors should note that tenants are rationalising space, some developers prefer pre‑leased projects, and broader economic uncertainty can affect leasing activity—factors that influence leasing risk for speculative developments.
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