Sydney and Melbourne fringe suburbs are achieving some of the highest office rents in Australia, according to JLL's Future Cities report.
Top performing precincts have outperformed the wider market in terms of office sector rental growth over the past 7 years.
South Yarra and Cremorne located on Melbourne’s city fringe and Surry Hills on Sydney’s fringe are the “standout precincts”, the report says the fringe locations surpass the wider market by 2 to 4 per cent per annum in rental growth.
JLL senior research director Annabel McFarlane says features common to both precincts reflect “the ingredients for out-performance”.
“Office precincts that are likely to outperform will have the following: rail infrastructure and urban amenity,” she said.
Surry Hills office rents are now the highest in Sydney’s fringe office market.
“The precinct has formed around a cluster of small businesses - predominantly technology, media, advertising based firms and like-minded businesses that want to be located in this cluster and compete for space, which drives rental growth more than in other suburbs,” the report notes.
Surry Hills adjoins the Sydney CBD core, home to average rents around annual $1,139 per square metre, this is above Surry Hills average prime net face rents at $760 per sq m annually.
Cremorne and South Yarra
The cities report describes Cremorne and South Yarra, within the Yarra precinct as “Melbourne’s non-CBD office market success story”.
While the area is maturing into a tech precinct, the report says that “no other metropolitan in Melbourne precinct has performed as strongly”.
“Rents are expected to increase further when new developments complete in 2020 and change the stock composition. Pre-lease rents are in the region of $550 to $600 for quality A- grade stock.”
The likes of Tesla, Uber, the Walt Disney Company, and REA Group have taken up commercial offices in Cremorne's former warehouses.