Victoria sees a spike in office leasing enquiry and demand

MELBOURNE, 26 April 2022 – JLL’s analysis of formal leasing briefs issued to the market in the first quarter of 2022 has seen Melbourne gain momentum from February to March with technology and pharmaceutical sectors strongly circulating the state’s market.

Formal Tenant Representation briefs across Victoria recorded a strong increase in demand over the past month recording 62 briefs in March for 54,840 sqm of office space, showing a 19% year-on-year increase. The increase in briefs from February to March increased by 63%.

JLL’s Joint Head of Office Leasing – (Victoria), Nick Drake said, “The overall increase in activity across the entire Melbourne office leasing market over the past month is an encouraging sign and a reflection of business decision-marking looking to solidify workplace strategies and return to the office following last year’s lockdowns.”

“For JLL alone, we’ve seen a positive start to 2022 with our Metropolitan Office Leasing team concluding 25 deals for over 38,000 sqm of space and securing two of the largest deals in Melbourne market throughout the first quarter of 2022,” Mr Drake said. 

One of the largest deals in the past month included Royal Melbourne Hospital securing 10,000 sqm at 611 Elizabeth, Melbourne. The hospital will take over the space which was recently completed by PDG Corporation.

The second major transaction included three tenants securing approximately 9,000 sqm of office space at M-City at 2107-2125 Princes Highway in Clayton on levels four, five, six and seven. The tenants included Ready Tech, Sigma Healthcare and Retail Zoo. The three deals were brokered by JLL’s Josh Tebb on behalf of Schiavello.

At a national level, JLL’s analysis of formal leasing briefs issued to the market in Q1 2022 showed there was a total of 80 Tenant Representation briefs, recording an increase of 5% compared to 2021 (January-March).

The Transactional data from JLL office leasing deals only in the market shows demand and deal activity below 500sqm continues to be strong, representing 65% of all JLL deals occurring in Q1 2022.

According to JLL Research, the Melbourne CBD recorded a positive net absorption of 38,600 sqm over the 12 months to March 2022 and the headline vacancy rate compressed by 0.2 percentage points to 14.8% in 1Q22.

Tenant centralisation activity has not had a detrimental impact on the Melbourne metropolitan office markets. In 1Q22, the Melbourne Fringe recorded 33,200 sqm of net absorption, while the South East suburbs was 1,700 sqm and 24,200 sqm over the 12 months to March 2022.

“The Melbourne CBD recorded a number of large leasing transactions over the quarter, and we will continue to see healthy levels of enquiry from small and mid-sized organisations and owners are willing to split floors and undertake speculative fit-outs to capture this enquiry,” Mr Drake said.