Melbourne’s Central Business District (CBD) is poised for revitalisation with the introduction of premium-grade office buildings boasting Green Star and NABERS Energy ratings, according to recent research by national property valuation firm M3 Property.
The study reveals that Melbourne currently has 234,593 square metres of premium-grade buildings under construction, with an additional 57,810 square metres at the site preparation stage and 85,665 square metres in the pipeline for future construction with permits approved.
These buildings are targeting at least a 5 Star NABERS Energy rating and most are aiming for 6 Star Green Star ratings.
Gary Longden, Director of Office Markets, Victoria at M3 Property, noted: “Demand is strong in the top end of the Melbourne CBD office market, with high rental growth in this sector. Achieving and maintaining a high NABERS Energy rating and high Green Star rating is being viewed favourably by tenants from a sustainability point of view.”
Despite limited transactions in 2023 and early 2024, premium-grade office buildings continue to attract occupiers, with a robust pipeline of quality stock entering the market.
Longden expects the Melbourne CBD office market to stabilise later in 2024 to 2025, with international investors likely to return as capitalisation rates stabilise.
The Property Council of Australia (PCA) statistics show that the total vacancy rate for Melbourne’s CBD office market increased from 14.1 per cent in January 2023 to 16.4 per cent in January 2024.
However, the vacancy rate for premium buildings currently stands at 11.2 per cent and is projected to remain stable.
This indicates a higher demand for premium office spaces compared to the overall CBD vacancy rate.
Jonathon Close, Director of Office Markets, Victoria at M3 Property, highlighted: “The premium end of the market shows a relatively low vacancy rate compared with Melbourne CBD’s total vacancy rate. B-grade office buildings are likely to be repurposed, including to A-grade buildings, which may reduce vacancy further over the coming years.”
The surge in premium-grade, environmentally sustainable office buildings underscores Melbourne’s commitment to sustainable urban development and is expected to drive further growth and stability in the CBD office market.
