Desperate businesses renting unbuilt office space

IN A sign of the tight Melbourne office rental market, Allens Arthur Robinson has joined the list of Melbourne businesses teeing up new headquarters in a building still under construction.

The law firm committed yesterday to occupying 13,000 square metres at 567 Collins Street with an initial lease of 12 years. The 26-level tower is expected to be completed by early 2011.

Only last week Deloitte said it would take the top 12 floors, or about 18,000 sq m, out of Cbus Property’s speculative CBW development in the CBD because it needed more space.

Melbourne’s office vacancy rate hit a record low last year. According to the Property Council of Australia’s latest report, the CBD vacancy rate slipped to 4.4% in the six months to December 31, from 5.9%.

Vacancy levels in prime Melbourne office markets are at their lowest in nearly 20 years.

Firms such as AAR and Deloitte are desperate for premium office space in the city and increasingly turning to developments under construction.

AAR’s new digs at 567 Collins Street are owned by APN Property Group. The building has been designed to exceed five-star ABGR, and six-star Green Star ratings.

It will be the first new building in the CBD to meet 2006 Property Council of Australia premium-grade services and amenities standards. It is also the first tower to be built in Collins Street for many years.

Michael Hodgson, fund manager of APN Funds Management, said AAR’s commitment as well as strong interest from several prospective tenants emphasised that the property market’s fundamentals remained sound.

“Well-located assets with strong tenants that are both commercially and environmentally sustainable will continue to generate strong interest from tenants and investors alike,” Mr Hodgson said.