Melbourne-based developer Goldfields has kicked off its leasing campaign for its $300 million tower in Melbourne's South Yarra, with construction set to commence without any pre-commitments.
The speculatively built office development is looking to take advantage of Melbourne’s red-hot city-fringe office market, which has seen prime rents increase by more than 50 per cent to average about $600 a square metre in the last five years.
The new 24-level office tower at 627 Chapel Street, which was approved in January by Stonnington Council, will replace an older office building Goldfields bought for $50 million in December 2017.
Goldfields, led by property developer and industry lobbyist Marco Gattino, joins a prestigious list of developers tapping into Melbourne's inner suburbs like Richmond, Cremorne and South Melbourne.
Gattino, has appointed Travis Myerscough from Colliers and Adam Spencer-Shirley from Cushman Wakefield as leasing agents.
Spencer-Shirley said Goldfields decision to speculatively develop the site was “not only a vote of confidence” in the strength of the Melbourne office leasing market, but also offered “genuine certainty for potential tenants”.
“With no pre-commitment required to commence construction as a result of the developer’s speculative approach, prospective tenants can have complete confidence that the project will be delivered by the September 2021 deadline.”
Goldfields acquired the site from another prominent Melbourne developer, Paul Fridman's Fridcorp, for $50 million in December 2017, after Fridcorp failed to secure a permit for a 37-level residential tower on the site.
Construction of the office tower, which has a $90 million construction budget and projected end value of $300 million, has commenced with demolition of the existing 6-storey office tower. A builder has yet to be appointed.
Floorplates are expected to average 1,000sq m, with larger spaces on offer between 2,000sq m and 6,000sq m and smaller spaces of between 500 and 2,000 square metres, targeted at smaller professional business, family offices and creative-type businesses.
“We’ve had strong interest from larger businesses with two to three year views on their lease expiries seeking space in the 3,000 sqm to 6,000sq m range,” Goldfields chief operating officer Lachlan Thompson said.
“At the same time, we’re already seeing enquiries from smaller businesses, looking for space in the 900sq m to 1,200sq m range, who traditionally start searching for their next home about 12 to 15 months from their lease expiry.”
It is understood that Goldfields is in advanced talks with several co-working space providers.
“There is a rapidly growing appetite for office space in South Yarra due to scarcity of opportunity in the area, coupled with record low vacancy rates in the Melbourne CBD and broader Melbourne City Fringe market,” Thompson said.
The Melbourne city fringe leasing market has the country's third-lowest vacancy rate at just 4.5 per cent behind only Parramatta, at 3 per cent, and the Melbourne CBD at 3.2 per cent.
The city-fringe precinct has become an increasingly popular destination for younger, educated professionals who want to work close to home.
“We see this project attracting tenants from St Kilda Road, the outer-east and the immediate vicinity, due to the high-end design and timing of the project,” Myerscough said.
Melbourne's fringes currently has 72 potential projects in the pipeline, equating to 745,600 square metres, with 22 currently under construction.