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Lease tails creating small niches

The amount of Melbourne office space available for sublease spiked 13 per cent to 77,200 square metres in December as the finance and insurance sector cut back on space and employment numbers.

CBRE’s Sublease Barometer shows contracting businesses accounted for 77 per cent of that space.

But CBRE regional director of office services Andrew Tracey said lease tails, created when tenants moved to new space, was also a factor.

“As new projects come online, there will be a lot of movement in the market, with a number of tenants relocating to premises, and subsequently flushing space back through to overall vacancy,” Mr Tracey said.

Consequently, a string of small leasing deals in refurbished buildings has underpinned the market and kept vacancy rates low. Space at 367 Collins Street and 570 Bourke Street has been absorbed and Guardian Childcare has signed up to 2300 square metres of space at the prestigious 101 Collins Street for a new creche.

Even Docklands, once the fringe market catering to large campus-style buildings with single tenants, is attracting smaller tenants.

Colliers national director of leasing, Andrew Beasley, said “There wasn’t the chance in the past. Even the ones with surplus space didn’t sublet it.

“But they’ve had to do it. There’s more 1000-square-metre tenants out there than 10,000-square-metre tenants.”

When Medibank moved out of 720 Bourke Street at the end of 2014, 17,000 square metres was left empty. Only about 1200 square metres is still available, he said.

New tenants include Chubb Insurance, which has leased 1578 square metres, and CASA with 1623 square metres.

“Esuperfund, who originally took 1623 square metres, have now taken an extra 770 square metres. They started their business in a small strata suite,” he said.

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