Victoria leading the way in office leases

More office space was leased in Victoria last year than in other states as higher incentives encouraged businesses to relocate, Savills Australia data shows.

More office space was leased in Victoria last year than in other states as higher incentives encouraged businesses to relocate, Savills Australia data shows.

The total amount of office space leased in Victoria over the year to June rose 36 per cent to 366,000 square metres - about 44,000 sq m more than NSW, Savills' head of research Tony Crabb said.

Leasing of office space greater than 1000 sq m is frequently monitored by agents and can be a barometer of business confidence and levels of activity.

While Victoria led the way on volume, NSW had the most transactions. It more than doubled the number of deals done - 147 compared with 70, Mr Crabb said.

Queensland reported 110 contracts exchanged, while South Australia, Western Australia and Canberra totalled less than 100.

"There are more incentives for businesses to make a move. That is teasing businesses out and creating activity," Mr Crabb said.

More businesses were relocating because incentives are at historic highs. "That is something we haven't seen a great deal of over the past three or four years. It's an encouraging sign for the markets."

The data shows 273,403 sq m of leasing activity in Melbourne's central office market and a further 93,220 sq m in suburban markets.

Most of the central-Melbourne leases - about 37 per cent - were in Docklands, while government dominated the suburbs, accounting for 56 per cent of activity.

Melbourne's vacancy rate has increased to 7.3 per cent from 6.9 per cent six months ago, Savills estimates. "[That] 7.3 per cent keeps the advantage on tenant's foot," Mr Crabb said.

Savills' leasing directors Nicholas Farley and Mark Rasmussen said the figures showed Victoria was less vulnerable than other states to a single industry such as mining.

The fewer transactions in Victoria and larger amount of space leased might be "misleading" but the data nevertheless indicated more activity in the state, Mr Farley said.