Office tenants flock to St Kilda Road: Savills

St Kilda Road on the fringes of the Melbourne CBD is the most sought-after office strip in Australia, according to the latest leasing figures revealed by Savills.

In the second quarter of 2011, office leases on St Kilda Road topped 24,000 square metres, with eight major deals signed over the three months.

St Kilda Road filled more office space than all other major metropolitan markets, with Sydney CBD coming in a distant second, with 10 transactions totalling 16,746 square metres.

Even excluding Spotless taking up an entire office building of 9,500 square metres at 549 St Kilda Road on July 5 in a deal negotiated by Colliers International’s office leasing director Ben Christie – by far the biggest deal on the street over the quarter – the strip would still have comfortably beaten the 10,500 square metres of office space let in the nearby Melbourne CBD.

Other major leases signed on St Kilda Road include energy consultants ServiceWorks taking up 5,500 square metres at 457 St Kilda Road at $235 per square metre, property developer Australand taking up 1,985 square metres at 484 St Kilda Road at $270 per square metre, Newcrest Mining occupying 1,800 square metres at 616 St Kilda Road for $250 per square metre and diet food group Jenny Craig leasing 1,700 square metres at 464 St Kilda Road at $255 per square metre.

The rise of St Kilda Road as a major office destination follows predictions by Colliers International that office tenants would start decentralising from CBDs.

Fringe markets stood up well against their CBD rivals in all the major capital cities.

The Sydney CBD office market had strong competition from both North Sydney (three deals totalling 12,990 square metres) and Parramatta and the suburbs (six deals totalling 11,028 square metres)

Brisbane’s fringe CBD markets attracted eight new tenants, who took a combined 5,053 square metres of office space, compared with eight deals in the Brisbane CBD totalling a slightly higher 6,177 square metres.

West Perth secured four major lease agreements totalling 3,068 square metres, compared with just two in the Perth CBD totalling 4,710 square metres in the second quarter of 2011.

The biggest leasing deal secured for the quarter was signed in May when the Department of Innovation, Industry, Science and Research committed to 10,000 square metres of laboratory and office space at the Precinct Corporate Centre developed by Goodman at 105 Dehli Road, North Ryde. The deal was struck at $350 gross per square metre.