Two empty bank offices blow out the country’s leasing market

Two vacant bank office buildings in Melbourne’s Docklands precinct, including the first property built on the block in 2004, have blown out the country’s total sublease space amid rising vacancy figures.

NAB’s former head office in Docklands
NAB’s former head office in DocklandsCredit: Pat Scala

CBRE’s Sublease Barometer report shows the amount of office space relinquished by companies in Perth, Brisbane and Sydney declined in the second half of last year, but the overall rate increased a further 9.2 per cent to 295,000 square metres.

The blowout was down to two empty offices in Docklands that account for a combined 57,000 sq m. The two buildings, originally leased by two major banks, NAB and ANZ, have been empty for some time, along with other campus-style offices in Docklands.

“Prior to this, sublease levels in Melbourne had been showing signs of stabilising. It’s not anticipated that more large blocks of sublease space will be brought to market in the near term,” CBRE research manager Thomas Biglands said.

NAB long ago moved out of 800-808 Collins Street, a colourful and funky campus-style building that heralded the start of the Docklands renewal. It moved into 38 floors of Cbus’ spanking new high-tech 395 Bourke Street tower at the end of 2021 and confirmed it still leased 700 Bourke Street.

Last year, the Department of Home Affairs moved into 26,000 sq m at 808 Collins Street and NAB subsidiary Insignia has about 10,000 sq m at No. 800 but it’s understood a further 25,000 sq m is available.

ANZ, meanwhile, remains in its headquarters at 833 Collins Street but in its building next door at No.839 there is a further 22,000 sq m up for grabs which ANZ is trying to sublease.

However, return-to-work mandates have reportedly resulted in more staff coming back into the office and the space could come back off the market.

The Property Council of Australia’s latest office occupancy figures show much improved numbers as staff return from holidays: Melbourne is up to 47 per cent from 41 per cent in September and Sydney has bounced to 61 per cent from 52 per cent.

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The granular detail underpinning the latest office vacancy figures came as the PCA released its latest Office Market report covering the past six months.

The national vacancy rate of 14.8 per cent is the emptiest CBD buildings have been since the mid-1990s.

Melbourne’s vacancy rate swelled to 16.4 per cent, up from 14.9 per cent, as new buildings opened at 500 Bourke and 300 Flinders streets.

Melbourne is expected to get a further 160,000 sq m of space in the next two years, when swank new offices offering the latest high-tech and environmentally sustainable features come online.

Empty floor space in Sydney blew the vacancy rate out to 12.2 per cent from 11.5 per cent in July 2023. New office space is still on the cards for Sydney. There are 142,528 sq m in major projects due for completion in 2024-25. Just over half of the new space coming online in the next three years is pre-committed to tenants.

Sydney’s sublease figures fell by 10,000 sq m to 129,753 sq m by the end of 2023 after peaking mid-year.

Despite the growing vacancy figures, agents have reported there is some confidence re-entering the office leasing market after a rough few years.

Knight Frank head of leasing Hamish Sutherland said the market seemed more buoyant at this early stage of the year.

“Tenants who are downsizing know what size they’re going to be. Last year they were trying to work out how many people were going to be working,” Sutherland said.

CBRE’s Ashley Buller said: “It’s a very fluid market. If workers return to the office some of that sublease space could vanish quickly.”

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Source: Thanks smh.com