Melbourne CBD completes four new office projects in Q3

The projects yielded a total of 33,400sqm.

Four office project completions were recorded in the Melbourne CBD according to a JLL report, adding a combined 33,400 sqm to total stock. The Fringe market recorded the completion of 206 High Street, delivering 6,078 sqm, as the S.E.S recorded no new supply.

JLL is currently tracking five projects under construction in the Melbourne CBD (148,700 sqm), with a further eight in the Fringe (90,300 sqm), and none in the S.E.S. The combined precommitment rate across these projects is 36.1%.

Here’s more from JLL:

The Melbourne CBD recorded positive net absorption of 5,100 sqm in the quarter. Demand was primarily driven by small tenant moves (<1,000 sqm), centralisation, and expansion. Headline vacancy increased to 18.8%.

The Melbourne Fringe recorded weak net absorption of -23,900 sqm, while the S.E.S. also posted a negative result of -11,500 sqm. Due to this weak demand, headline vacancy increased to 21.5% in the Fringe and 14.8% in the S.E.S.

Investment activity picks up in Melbourne’s CBD

CBD prime net effective rents (PNER) rose 0.3% q-o-q to AUD 310 per sqm per annum (-3.5% y-o-y). Fringe PNER fell -1.4% q-o-q to AUD 280 per sqm per annum (-1.2% y-o-y), as the S.E.S remained unchanged at AUD 235 per sqm per annum (-1.0% y-o-y).

Prime CBD yields remained stable at a range between 5.75%-8.00%. Fringe prime yields stabilised at a range of 6.50%-9.00%, while S.E.S yields also remained unchanged at a range between 7.75%-8.75%.

Outlook: Melbourne CBD’s demand and investment landscape set to benefit from domestic stability

The near-term demand outlook is encouraging, with high volumes of existing tenant requirements showing preference for the CBD or centralisation into this market. Decision-making remains stymied by global volatility.

Liquidity is anticipated to improve in the investment market over the next 12 months, with recent transactions indicating intensifying attention from overseas capital. The stable domestic outlook will act as a tailwind to capital deployment.