Office occupiers have snapped up two more South Melbourne buildings to refurbish.
In the biggest deal, 10-12 York Street, with 372 square metres of modernised B-grade commercial space over two floors, and six undercover car parks, traded for $3.9 million.
On 344 sqm, zoned Mixed Use, and vacant – the block was also marketed to developers and investors.
Yellow brick warehouse
Meanwhile, less than 100 metres away, a business outlaid $2.55m for a yellow brick workshop occupied by Duncan Auto Electrical.
At 30-32 Tope St, on the north west corner of York, the building spreads over the whole 234 sqm Commercial 2 zoned block, neighbouring the 150 year old Maori Chief Hotel and overlooked by the near new 101 Moray St, which the Deague family sold to Centuria last July for $205.1m.
Both buyers are looking to move in after upgrading – or in the case of Tope St, creating – the office area, which is expected to be A-grade.
The deals come two months since Adelaide-based education group Durban International College outlaid $6m for a three level 699 sqm red brick warehouse at 16-20 Thistlethwaite St, in the suburb, to occupy.
Like 30-32 Tope St, that property is subject to a lease, expiring with options, in 2031.
It is also on a Capital City 1 zoned block, spreading 417 sqm.
Developers, government back South Melbourne offices too
Lowe Living is also planning commercial space as part of a nine level mixed use building at the north west corner of Clarendon and York streets (story continues below).
Hickory recently completed one of the suburb’s bigger buildings, at 68 Clarke St, also with frontage to Chessell and Market.
The state government is also intending an innovation-focused office precinct as part of its redevelopment of the ex-GMH site at Fishermans Bend, much of which captures South Melbourne zoned land.
“The confidence in the office market continues to grow in South Melbourne off the back of two major office buildings, 68 Clarke St and 101 Moray St,” Mr Leggo said.
“These A-grade offices are leased to tenants including Activision, Ooh Media and Southern Cross Austereo, which made a move from nearby precincts,” he added.
“Data from Colliers’ latest Q3 Snapshot shows demand for office space in Melbourne’s city fringe has remained at a high level on record, sitting at 61,000 sqm over the six months to September, 2022, a slight increase from the six months prior,” according to the executive.
“The combination of commitments to new developments and absorption of existing stock improved the vacancy rate to 12.7pc, down from 14.9pc in March, 2022”.
Businesses chasing vibrancy
Colliers office leasing director Travis Myerscough said businesses have actively been seeking new accommodation since COVID.
“Coming out of the pandemic and returning to the office, employees want more than just an office to go to,” he added.
“South Melbourne offers that with its market, Albert Park, everyday retail, gym, food and beverage options and cult favourite cafes,” according to the executive.
“It’s an emerging office precinct for corporate offices attracting strong interest from all over the fringe markets and CBD, as tenants look for more amenities and an upgrade in accommodation, while still being just a 20-minute walk from the CBD.
“Demand is expected to increase with limited supply being brought into the market for the six months of March to September, 2022, with only two buildings over 5000 sqm being delivered.
“The pipeline of office space in Melbourne’s city fringe into 2023 is significantly softer than previous years as we see the lag effect from COVID, with roughly 63,000 sqm [to be] added across five buildings, with more than half this space already committed”.
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