Victorian financial services businesses looking to centralise their offices in Melbourne’s CBD are fuelling a recovery in the market.
Data from property group, JLL, revealed 102,000m2 of office space was absorbed over the 12 months to March 2015.
The research indicated that centralisation were likely to remain a theme of the Melbourne market, with tenants from fringe and suburban locations continuing to seek prime CBD offices.
“Centralisation is expected to remain a significant contributor to demand for some time to come,” the report said.
“We forecast net absorption to outstrip supply additions throughout 2016, 2017 and 2018 resulting in vacancy compressing from 9.6 per cent currently, to a low of eight per cent in 2018.”
The report found that financial services businesses accounted for 19 per cent of tenant briefs in the city, second only to the IT sector.
“Finance sector tenants are responsible for the second highest proportion of current tenant briefs,” the report said.
“Sub-sectors of financial services are growing – the big four banks, who in recent years reduced headcount in their Australian operations, are recording strong revenue growth and an improvement in operating profit and productivity. Much of this is due to an increase in domestic banking services.
“We expect the next phase of expansion will see an increase in headcount and investment in subcontractor services.”
While JLL forecast positive net absorption over the next three years, as financial institutions and IT firms look to boost headcount, the group said withdrawal of office stock in the fringe office market for residential redevelopment would also play a part in increasing demand for CBD space.
