Melbourne Fringe Office Figures Q4 2023

Key Points:

• Leasing demand saw mixed performance in H2 2023, with prime absorption outpacing secondary absorption in Southbank. Demand concerns have emerged as declining effective rents in CBD precincts threatens fringe competitiveness.
• Expected supply is concentrated in Melbourne’s City Fringe and eastern Precincts. There are no major developments currently anticipated in Southbank and St Kilda Road.
• Vacancy for prime assets remains below secondary grade stock as of H2 2023. Prime vacancy for Southbank decreased 129bps to 16.56% in H2 2023.
• Face rents across the fringe and suburban market saw mixed movements, with precincts seeing stability or declines. Elevated incentives continue to put downward pressure on effective rents.
• Office sales in Melbourne’s fringe saw a slight rebound with the sale of 8 Nicholson Street, however total volumes remained significantly below historical levels.
• Yield expansion continued over Q4 2023 as repricing continued in the face of mismatched expectations.