Having had time to reassess their staff and real estate requirements during COVID, office tenants are searching more confidently for space in 2023 as they look to entice staff back to the workplace, boosting enquiry levels in Melbourne’s CBD.

Fitzroys Office Leasing Team’s Phillip Cullity and Stephen Land have secured multiple deals in the popular East End, as tenants look to be close to the thriving retail and hospitality offering of the precinct, as well as Parliament station.

Enquiries have been particularly strong for spaces in the sub-500sqm bracket.

“Demand is broad-reaching - from architects, engineers, family offices, legal, IT, finance, property, to non-profit groups,” Cullity said.

“They’re motivated by the need to secure fresh space that will entice their staff back to the office, and the CBD is still the preferred location for attracting and retaining staff.

“CBD lifestyle and hospitality amenity, and transport are unparalleled.”

Cullity said, “The market is continuing to rightsize following COVID, with businesses beginning to have a clearer understanding of their space requirements both as a whole and on a square metre per-person basis.

“Businesses assessed their staff numbers during 2022 and now they’re confident of who and how many will be working from home and coming in each day.”

“There’s been a clear uplift in office enquiry through the CBD for a result. Tenants are also willing to commit to medium and longer-term deals again.”

Cullity said a majority of businesses want owners to provide a new fit-out, with construction and materials costs particularly high. However, there is a smaller number of tenants that want to do their own fit-out, preferring a blank canvas so they create what they want from scratch.

Incentives remain high and tenants are taking advantage of this to upgrade the quality of their accommodation.

Building renewal projects are paying off for owners. At 124 Exhibition Street, several deals have already been struck by Cullity and Land as the whole building goes through a repositioning.

Of particular interest has been a whole office floor that was quickly filled up after being subdivided into smaller suites of 80 to 100sqm, with a communal boardroom and kitchen/ breakout area.

“Tenants have gravitated towards this concept. We’ve had great enquiry from small and mid-size tenants wanting an East End presence, and spaces of this size in the East End are rare,” Cullity said. These deals saw medium to longer-term commitments, and there has been an uplift of rents given the works to circa $600 to $700/sqm net.

The entire building is undergoing repositioning, creating a high-end boutique building with floor plates of 350sqm. Works will be completed this year.

“Tenants have been impressed with the new amenity being provided, new end-of-trip facilities, new windows which are openable, market-leading sustainability credentials, and the prospect of a new food and beverage offering on the ground floor,” Cullity said.

Groups interested have ranged from non-profits to architects, property industry businesses, family offices, creatives and advertising and marketing firms, wanting close proximity to the Parliamentary precinct and Parliament station. The top floor will be offered with exclusive use of the rooftop terrace area with views extending across towards Parliament and Treasury gardens.

At 49 Exhibition Street, Cullity and Land have quickly leased out 3 fully refurbished floors at 49 Exhibition Street to K2LD, Citta and Louders - primarily all involved in the property sector and all wanting an East End location - taking the building to full occupation.

They will occupy the upper levels of 240sqm per floor also on medium to long-term leases, struck at circa $600/sqm net.

The private owner has undertaken refurbishments across the 5 floors of the building - totalling 1,200sqm - and which is located opposite Collins Place.

At 141 Flinders Lane, Fitzroys has achieved a record rent for an Art Deco space of circa $1,000/ sqm gross.

Two whole floors have been leased in the building, above Coda restaurant and opposite Chanel. Recruitment firm U&U has expanded out of serviced office space and taken up the whole floor of 213sqm as it seeks to attract staff to the office. Another recruitment group leased the other 213sqm floor, having reduced their requirement as they had excess meeting rooms they didn’t need anymore. Both groups are not handling many interactions such as interviews and meetings over Zoom or Microsoft Teams.

“The tenants were attracted to the thriving East End location, Art Deco feel and ability to solely occupy a whole floor.”

The leases were medium-term deals.

Meanwhile, storage and warehouse spaces are being converted to retail and office use.
At Sargood House, at 73 Flinders Lane, streetwear and footwear brand Up There has leased a second CBD outlet following their lease of 179 Flinders Lane a year ago, also in a deal by Fitzroys’ Cullity, Land and Hamish Dennis.

The 400sqm lower ground floor area at Sargood House was been brought back to a concrete shell and repositioned as a showroom close to Culture Kings and next to restaurant Cecconi’s.

“This is further evidence of the growing trend of fashion and streetwear groups looking to set up in the city’s East End,” Cullity said.

“We’re continually seeing storage and warehouse space being converted to retail and office uses continues in this highly sought-after precinct.”