City ‘leads’ in office market

JOHN VAN KLAVEREN
GEELONG’S office rental market is the strongest in regional Australia, according to new data from valuer Opteon Victoria.
Commercial services director Todd Devine said Geelong had outpaced rivals Newcastle and the Gold Coast.
“A-grade office rents in Geelong are comparable to Melbourne’s suburban office market,” Mr Devine said.
Rents for prime-quality office accommodation in Geelong had doubled in the past eight years in line with the city’s low vacancy rate.
“Market rents for good office accommodation are in the vicinity of $200 to $225 per square metre, while new buildings will attract rentals close to $300 per square metre,” Mr Devine said.
Opteon found that Geelong had a vacancy rate at 5.5 per cent compared to 11.5 per cent for Newcastle and 24 per cent on the Gold Coast.
Mr Devine noted a “flight to quality” office space in Geelong, with the construction of a 6200sqm building pre-committed to Centrelink and Australian Taxation Office.
“But to get new prime office space built tenants have to pre-commit to an economic rent, which will be higher than the market rent,” he said.
“It costs the same to build in Geelong as its does in Melbourne. The only cheaper part of a development in Geelong is land.
“The private sector has been reluctant to pay economic rents, so new development has to be driven by government.”
Mr Devine said upgrading lower-standard accommodation was difficult, expensive and often failed to include car parking.
“Without car parking tenants often are not prepared to lease space and without a secured tenant owners are reluctant to refurbish.
“The lack of certainty around car parking is holding back office development.”
Opteon research manager Richard Jenkins said Geelong’s central business district office market amounted to 231,249sqm, of which 12,721 sq m was vacant.
He predicted Geelong’s total office stock would outgrow Newcastle within two years.
City of Greater Geelong put aside $20 million in its budget for office space to allow for the option of purchasing the former tax office building in Brougham Street.