Victoria leading the way in office leases
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.
Frequently Asked Questions about this Article…
Savills Australia data shows office leasing in Victoria rose 36% to about 366,000 square metres in the year to June. For everyday investors, higher leasing volumes can signal stronger demand for office assets in the state and increased market activity.
Yes. Savills’ head of research Tony Crabb says incentives are at historic highs, encouraging businesses to relocate. Those higher incentives have been drawing tenants into the market and creating leasing activity.
Victoria leased about 44,000 sq m more than NSW (366,000 sq m vs a lower figure for NSW). However, NSW recorded more transactions—147 deals compared with Victoria’s 70—so NSW had higher deal count even if Victoria led on total space.
According to the Savills data, Queensland reported 110 contracts exchanged. South Australia, Western Australia and Canberra each recorded fewer than 100 transactions over the same period.
Melbourne’s central office market saw around 273,403 sq m of leasing and suburban markets about 93,220 sq m. Roughly 37% of central-Melbourne leases were in Docklands, while government tenants accounted for about 56% of suburban leasing activity.
Savills estimates Melbourne’s vacancy rate rose to 7.3% from 6.9% six months earlier. Tony Crabb notes that a 7.3% vacancy keeps the advantage on the tenant’s side, meaning tenants may have more negotiating power while investors should watch how vacancy trends affect rents and demand.
Savills leasing directors Nicholas Farley and Mark Rasmussen said Victoria appears less vulnerable to exposure from a single industry such as mining, suggesting a more diversified tenant base across sectors.
The data indicates increased leasing activity in Victoria driven by historic incentive levels and larger lease volumes in Melbourne, which is an encouraging sign for the office market. Investors should note the rising vacancy rate and the mix of fewer but larger deals—Savills warns that fewer transactions combined with larger space leased can be misleading, so consider both volume and transaction count when assessing market strength.
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