Subleasing puts pressure on market
Estimates suggest at least 85,000 square metres of empty sublease space is being touted to prospective Melbourne tenants, compounding rising office vacancy rates.
Downsizing banks, government and finance companies are adding the bulk of the spare CBD and Southbank office space to the leasing market, CBRE leasing director Chas Keogh said.
ANZ's rationalisation at 55 Collins Street has left about 15,000 square metres available. NAB is seeking to offload another 7000 square metres in Lonsdale Street's BHP Billiton Centre, while the state's Finance Department is looking to sublet 10,000 square metres at 35 Spring Street and another 1000 square metres in Casselden Place, industry sources suggest.
"The size of the sublease vacancy is a new dynamic in the Melbourne market. Whilst there are extensive sublease opportunities, a majority of these present significant challenges to a potential occupier," Mr Keogh said.
Offices with better fitouts were generally easier to sublease and filled more quickly, he said.
Social media giant LinkedIn this week moved to take advantage of the sublease market, inking a three-year $507 per square metre (net plus outgoings) deal for space in 28 Freshwater Place.
The world's largest professional networking firm will relocate from City Road to space vacated by mining company MMG. LinkedIn was attracted by the Southbank location and "high-end fitout with a turnkey solution", Jones Lang LaSalle's Andrew Field said.
Mr Keogh said the sublease market, estimated to be between 1.5 and 2 per cent of total stock, was relatively volatile.
Experience showed that large companies subleasing space tended to withdraw it suddenly if business conditions improved.
Equally, if confidence turned sour, the amount available might increase, he said.
Melbourne's CBD office vacancy rate dropped slightly to 8.1 per cent in the last quarter of 2012, according to Jones Lang Lasalle.
Despite the decline, "there will be upward pressure on the vacancy through 2013 with the downsizing of the public sector ensuring the demand environment remains tough over the next 12 months," JLL's Victorian director Andrew Wood said.
Competition for tenants was increasing as more backfill space became available, Mr Wood said. Much of the recent rise in vacancy rates could be attributed to an increase in sublease space, he said.