Trains, brains and a certain cool make an office precinct outstanding
Rents are rising fast in the old rag trade districts of Sydney and Melbourne, where the transport is excellent and education levels are high, JLL’s latest research has found
AUSTRALIA, 16 SEPTEMBER, 2019 – Sydney’s Surry Hills and Melbourne’s Cremorne and South Yarra are achieving some of the highest fringe office rents in Australia thanks to their good train connections, character-rich buildings and amenities such as restaurants and music venues.
These factors help organisations attract and retain a highly-educated workforce, particularly in creative and digital industries.
Surry Hills, on the southern edge of Sydney’s CBD, is an outstanding performer, with prime rents rising 95% between 2012 and 2019. Tenants can expect to pay an average of $760 per square metre in the best buildings. In Melbourne, Cremorne (the south-west tip of Richmond) saw prime rents rise 65% over the same period, from $305 to $481 per square metre.
JLL’s latest Future Cities report, Great Office Precincts, examines the Fringe markets of Australia’s capital cities to discover what is making certain suburbs a runaway success with tenants.
Each precinct was assessed against a list of 15 metrics, the most important being public transport, urban amenity, brand and profile (including hipster appeal), workforce demographic and the balance of new and old industries in the area. The toolkit will help JLL identify future strong-performing office precincts.
Surry Hills is adjacent to NSW’s busiest rail hub, Central Station, while Cremorne and South Yarra are home to major rail interchanges.
The suburbs are three of just 18 on Australia’s eastern seaboard that have a rare combination of more than 50% of the population aged 20-39 and more than 40% with a bachelor’s degree or higher, according to 2016 Census data.
JLL’s Senior Director – Research, Australia, Annabel McFarlane, said: “Top-performing precincts have a demonstrated track record of attracting and retaining office tenants. Creative and innovative companies and start-ups have the potential to expand rapidly, and successful companies in the precinct are typically in growth industries.
“However, these precincts risk becoming victims of their own success as residents, workers and new developments increase density and congestion.”
JLL Research is tracking 283,200 square metres of potential office development in Melbourne’s Yarra precinct and close to half of this is in Cremorne/South Yarra.
“If all of this proceeds, the office-based workforce in this area could more than double to nearly 18,400,” McFarlane added. “Rising rents may drive out creative and small businesses that create culture and brand, to be replaced by larger, less nimble corporates.
“In Sydney, if Surry Hills continued at the same trajectory, organisations would be priced out and Redfern and Eveleigh (where Mirvac is developing the Australian Technology Park) would be beneficiaries.”
JLL’s Head of Office Leasing, Tim O’Connor, said Our analysis finds that over 50% of office stock in Sydney’s Central Fringe precinct is within a “block” of access to multiple lines on Sydney’s rail network via, Museum, Central and Redfern Stations. In Surry Hills the proportion is 56%.
In Melbourne, Cremorne / South Yarra is one of Melbourne’s most sought after office markets with almost 58% of stock having access to rail infrastructure via South Yarra, Richmond and East Richmond which service most of Melbourne’s East suburbs.
Proximity to a rail station reduces overall commute times for staff and clients and that’s good for productivity.”
JLL’s Executive Director Major Projects – Victoria, Stuart Colquhoun, said: “Tenants can be very particular about a location and the brand of a precinct is an important consideration. The Cremorne market including parts of Richmond has become one of the most sought after locations because of its brand as an innovation precinct.
Anchor tenants are also important, as companies like to agglomerate with similar companies. MYOB and Seek are relocating to Cremorne to be close to other technology companies and to access a similar talent pool.”
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of nearly 92,000 as of June 30, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com