Warning given to Melbourne CBD office space owners to consider selling up
The health of Melbourne’s CBD is concerning industry experts. Picture: David Caird
Owners of Melbourne’s second-tier office spaces have been told to start selling them now amid the city’s lagging revitalisation post-Covid.
The warning comes after the Victorian budget earlier this month revealed the government will cut back office leases due to expectations their staff will work from home in an ongoing way. The industry is increasingly concerned about the impact this will have on the health of Melbourne’s CBD.
RELATED: Sly change adds $25k to building a home overnight
Melb suburbs overseas homeseekers are flocking to
Housing drag: Australia’s ‘major weakness’ exposed on global scale
At the Australia-Israel Chamber of Commerce (AICC) property forum on Tuesday, Charter Hall office chief executive Carmel Hourigan said her advice for owners of mid-class offices would be to “sell some of them”.
She said there were still organisations that wanted to have their headquarters in well-located, high-amenity areas so long as the buildings were energy efficient, but claimed it was quite expensive to “green up” these types of structures.
Development firm Quintessential’s head of assets Noah Warren said the focus needed to be on what could drive employees back into the city’s second-class offices that had minimal amenities.
Charter Hall office chief executive Carmel Hourigan said it might be time to sell some of the office spaces in the Melbourne CBD. Image/Russell Millard
He added that he was concerned about the effect the state government’s decision to cut their office spaces would have on the future of the five-day working week, especially in the CBD.
Wizel Property group managing director and moderator of the event Mark Wizel forecast the hottest office building type was going to be smaller, modern spaces in the best locations, like the top-end of Collins St.
“This is along the lines of unfortunately where our society is headed, the rich are getting richer and the poor are getting poorer,” Mr Wizel said.
“The wealthier will be happy to pay a higher quantum of dollars for their weekly rent so long as the office building ticks boxes for their image and ticks boxes for its location.”
Wizel Property group managing director Mark Wizel.
He said mid-tier office space owners were going to deal with more tenants demands for less, and would need to spend more on building improvements to increase their chance of leasing them out.
Mr Wizel added that with the state government reducing their offices, he was concerned about the effect this would have on the private sector.
James Richardson Property general manager James Aldred said employees working remotely was the reason there was now a “handbrake” on commercial office rents.
He also pointed out that the oversupply of new office spaces could get worse as more had been approved to be built at a time of record-low vacancy — with a lot still “washing through”.
However, Mr Aldred said he believed that in the next two to three years those spaces would slowly be taken up and vacancy rates would tighten.
MORE: Australian Institute of Architecture, Houses Awards showcase Vic’s spectacular homes
Glen Iris: Knighted beer baron Peter Sinclair serves up renovated Federation-era house for sale
