The deal, the latest in a string of major recent commitments in the area, brings St Kilda Road’s office vacancy rate to about 6.5 per cent, less than half the rate recorded three years ago, and down from 8.6 per cent recorded in July 2007.
Healthscope, which owns and manages medical, rehabilitation and psychiatric hospitals in Australia, New Zealand and Asia will relocate from offices at 407 Royal Parade in Parkville where it occupies about 1400 square metres.
Its new premises, on the ground floor and three upper levels of 312 St Kilda Road measures just over 4800 square metres.
Coincidentally, the new office building is close to Symbion Health at 380 St Kilda Road, which Healthscope tried unsuccessfully to take over last month. Minority shareholder and Healthscope competitor Primary Health Care used its 20 per cent ownership to block Symbion making the deal, despite overwhelming support by the other shareholders.
According to an ASX announcement posted on its website, Healthscope is continuing negotiations to take over Symbion.
Lemon Baxter director Michael McClusky who was appointed to find office space for Healthscope, said the St Kilda Road office was chosen over a number of alternative buildings. He said Gateway’s location, which is walking distance from Flinders Street station, as well as the quality of the refurbished space, swayed Healthscope to move from north to south. He declined to elaborate on the details of the lease including starting rent and lease term.
The Healthscope deal follows that of telecommunications giant Telstra which recently leased about 7000 square metres of office space in two buildings at 324 and 332 St Kilda Road, and cosmetic company L’Oreal which leased 4278 square metres at 564 St Kilda road. L’Oreal will relocate from an office in Sandringham.
Combined, the deals – which have all been announced in the past six weeks – soak up more than 16,000 square metres of the 65,000 square metres the Property Council of Australia reported as vacant in its July 2007 Office Market Report.
St Kilda Road office vacancy levels are expected to fall to at least 6.5 per cent in the PCA’s January 2008 office market survey, because of these deals.
CB Richard Ellis senior director, office services, Kenny Thorburn, who was marketing space at 312 St Kilda Road, says there has been a positive change in sentiment toward the fringe office market. “For the first time in a long time, the precinct is now being seen as a preferred location by businesses such as L’Oreal, instead of relying solely on demand from the existing companies already located in the strip.”
Other companies to migrate to the area recently include Computer Associates which leased 4500 square metres at 380 St Kilda Road and Seek which leased about 4,500 square metres at 541 St Kilda Road.
According to CBRE Research associate director Glenn Lampard, Grade A net face rents have increased more than 6 per cent in the twelve months to July 2007, to be just over $250 per square metre. “This compares to Grade A CBD net face rents, which were indicatively around $300 per square metre mid-year.”