The migration back to the Melbourne CBD has begun. Recent research from Jones Lang LaSalle reveals a shift in demographics, with many businesses on the city fringe returning to the Melbourne CBD during 2013. There has been a five-fold increase in “centralised” real estate transactions over 1,000 square metres during the previous 12 months.
The change is further emphasised when net absorption is taken into consideration. There was a positive net absorption in the Melbourne CBD of 8,380 square metres, compared with the city fringe undergoing a negative net absorption of -32,550 square metres.
The return to the CBD has become possible in part due to office fitout incentives, along with a narrowing rental spread between markets around the city. The limited city fringe office space supply has also had a significant effect, with only one quarter the amount of 1,000 square metre prime options available outside the CBD.
The research also found an increased demand for high quality office locations, a change driven by cost savings and adjustments to the way people are working. Company identity is often promoted by location, with the CBD traditionally symbolising a corporate environment in close proximity to competitors and customers. Since 2008, there have been more than 40 major moves of over 1,000 square metres by tenants moving back to the CBD, mostly around the periphery.
Increased vacancy rates have exerted pressure to provide incentives such as rent-free periods and generous fitouts provided by quality craftspersons from companies such as EBN Office Fitouts. It’s becoming increasingly familiar to see building management offering many upgrade solutions for tenants wanting to move from their current accommodation.
The rental spread between the city fringe and Melbourne CBD averaged out over the last 10 years is approximately 25%, although if incentives such as office design and fitouts are taken into consideration the spread narrows to 12%. It’s expected that limited city fringe development combined with CBD incentive options, especially for large companies, will continue to support demand in the CBD, at least in the short term.
According to a spokesperson for Jones Lang LaSalle, “A reactivation of business investment projects will have a positive impact on white-collar employment, supporting our forecasts of above trend net absorption in the Melbourne CBD projected for 2016 (75,000 square metres) and 2017 (110,000 square metres).”
Fitout and design has become synonymous with progressive business thinking, especially when coupled with innovative ideas for streamlining the workplace, increasing employee satisfaction, and attracting a wide client base. Incentives offered by CBD landlords can actually totally offset the increased rent required for a prime location, and also improve business performance, promote company identity, and increase client awareness.
EBN Office Fitouts continue to lead the way with innovative strategies for getting the most out of your workplace, no matter how large or small, by delivering results above and beyond customer expectations.