We are pleased to provide you with our June edition of the JLL Melbourne CBD Sales Market Update.
Please contact me on 0402 011 266 / [email protected] if you would like to receive our regular market updates.
Recent Market Observations
- Demand for Melbourne CBD real estate has intensified throughout May, as local and off-shore buyers seek purchase opportunities within the Melbourne CBD. We are sensing a positive shift in sentiment as a result of positive net migration in Victoria, increased office occupancy levels across the country and some strong transaction activity.
- May 2023 saw the most CBD transactions in a month since October 2022, with three Melbourne CBD transactions taking place showing the increased demand.
- JLL have more unsatisfied buyer requirements now than at any time over the past year. The predominant buyer type is owner occupiers who are seeking to take advantage of the perceived opportunity within the market. Across all of our team’s current on-market listings, we have witnessed a surge in buyer engagement and activity in Q1 2023 since Q4 last year; +14% registered buyers, +32% inspections, +15% dataroom access requests and an average of 4.8 offers received per campaign.
- The Melbourne CBD recorded two projects reaching completion over Q1 2023. Charter Hall’s delivery of 140 Lonsdale Street (22,750 sqm) and DeGroup’s completion of 263 William Street (3,800 sqm) being 0% pre-leased.
- The CBD supply pipeline remains active, with 5 new projects currently under construction, which are expected to deliver 168,150 sqm (27% pre-committed) by late 2024. Additionally, there are four refurbishments/extensions currently under construction, which are expected to reinstate 62,250 sqm (43% pre-leased) to the market by early 2024. Overall, there are 9 projects under construction expected to deliver 230,400 sqm (31% pre-leased) over the next 2-years.
- The supply pipeline currently has 8 projects with plans submitted (406,400 sqm), followed by 17 with plans approved (466,000 sqm), which combined has the potential to deliver approximately 872,000 sqm over the medium-term.
JLL Melbourne CBD Sales Team’s Transactions – May 2023
Please see below a summary of the JLL Melbourne CBD Sales team’s transactions for May 2023. Please also see below a newspaper article relating to each deal.
Please click here to view the article for the sale of The Adelphi Hotel: AFR Article - Melbourne's Adelphi Hotel in new hands for $25m
Please click here to view the article for the sale of 420 Collins Street: The Age Article - Collins Street offices fetch $11.2 million
Melbourne CBD Leasing Market Update
- Deals taking time to conclude from signed HOA to lease execution????????
- VSG and AFG remain most active???????
- Vacancy rate tipped to remain around 17% for next 1 to 3 years???????
- Co-working groups becoming active again???????
- Numerous professional firms now mandating return to work at least 3 days a week???????
- Docklands bouncing back with numerous direct deals being concluded – Costa Foods 3,500sqm, Dept of Defence (1) 3,500sqm, Dept of Defence (2) 28,000sqm, Optus 8,000sqm, Medibank 14,000sqm???????
- 4 CBD developments about to commence construction without a pre-commitment totalling approx. 80,000sqm of new supply??????
- 2 major tenants about to come to market seeking a total of 50,000sqm
Transaction Activity Update – Melbourne CBD – May 2023
As mentioned above, transaction volumes within the Melbourne CBD have increased in May 2023 – please see below deals concluded this month:
Articles of Interest (please see below a link to each article for your reference)
The AFR –?‘The great office upgrade’ gathers pace across CBDs
- Premium-grade office towers experienced the strongest growth in leasing demand last year, up 3.9 per cent year-on-year, according to an analysis by Investa.
- A-grade space, which, at 45 per cent, comprises the largest portion of the office market, had softer growth in demand, up 1.3 per cent over the year. Most starkly, leasing demand for buildings of lesser quality – in the B to D grades – continued to decline and was down 1.8 per cent.
- Trends in the take-up of space also add weight to the ‘‘flight-to-quality’’ thesis. While the gross take-up of space across the CBD markets last year hit 60 per cent of the pre-pandemic three-year average, this had risen to 80 per cent of pre-pandemic levels within the prime markets.
- Commercial property sales slumped to their lowest level in more than a decade over the March quarter as expectations on both sides slowly adjust to a high-rate environment.
The AFR –?Boutique $200m Melbourne tower chases family offices
- Developer Time & Place believes the Melbourne CBD office market will be a much more ‘‘positive’’ story in three years – especially for boutique buildings – and has lodged plans to build a 30-storey commercial tower on the famous Hotel Lindrum site at the ‘‘Paris End’’ of the city.
- Though it might sound ‘‘counterintuitive’’ to be undertaking a speculative $180-$200 million office development given the state of the office market more broadly, Mr Price said the developer’s own hunt for office space had revealed a dearth of opportunities for those seeking floor plates of less than 400sq m.
- ‘‘We plan to build an enormously well-regarded building at the Paris End of the city, that will have links to all the hospitality amenity on Flinders Lane and that could serve as the headquarters of private family offices,’’ he said
- Having agreed to pay Rich Lister Robert Magid $50 million for the building just over a year ago, Mr Price said Time & Place intended to kick off construction before the end of the year, without any pre-committed tenants.
The AFR – Lendlease gets green light for Town Hall Plan
- Lendlease is pressing on with its latest over-station development in Melbourne, a 10-storey office-and-retail complex that will rise above one of the CBD’s busiest intersections and stand next to well-known watering hole, Young & Jackson.
- The 16,000-square-metre facility was granted planning approval by the state government and will be built above one of the entrances to Town Hall Station, at 25 Swanston Street. The over-station site places the development just opposite Flinders Street station, the city’s main suburban train terminal.
- The building, expected to begin construction next year, will form a key node on the city’s commuter trail, from both the new underground metro line and Flinders Street trains and nearby trams, as well as Flinders Lane, a popular entertainment and hospitality strip.
- The Melbourne project above Town Hall Station, designed by Hassell architects, will connect Flinders Street and Flinders Lane along with the Scott and Cocker alleys. The smaller lanes will be reactivated through an arcade with about 2000 sq m of retail and dining outlets.
The AFR –?Melbourne CBD site set for $420m hotel tower
- Developer Sterling Global is looking to stamp its mark at the busy western end of Melbourne’s Collins Street after unveiling plans to turn a prime corner site co-owned for decades by pub baron Bruce Mathieson into a $420 million high-rise hotel and apartment tower.
- The 42-level project opposite Southern Cross Station will rise above the 100-year-old former State Savings Bank site, on the corner of Collins and Spencer streets – currently operating as the Batman’s Hill on Collins hotel – as part of a development spanning three adjoining sites at 623 Collins Street, 607-613 Collins Street and 66-70 Spencer Street.
- Projects in this precinct include Charter Hall and GIC’s $800 million premium office development at 555 Collins Street, due for completion in June, and a 46-level premium office tower that US-based real estate investor and landlord Hines will soon start building across the road at 600 Collins Street.
The Herald Sun – Stamp Duty for the chop…but not on housing
- Stamp duty will be abolished on commercial and industrial properties in a move the government says will add $50 bn to the Victorian economy.
- Stamp duty will be replaced by an annual property tax set at 1 per cent of a site’s unimproved land value.
- A transition period will allow the first purchaser of a property after July 1,2024 to pay either stamp duty or the equivalent amount over a 10-year period.
- Once a property enters the new system after this time, stamp duty will never again be payable and an annual property tax will apply
- The arrangements will not apply to the current owners of commercial or industrial properties purchased before July 1, 2024.
The AGE – Commercial Property Sector says stamp duty abolition will fuel investment
- The state government’s decision to abolish stamp duty for commercial and industrial property buyers will likely boost prices and make Victoria a more attractive place to invest.
- In welcoming the decision to abolish lump-sum stamp duty payments in favour of an annual property tax, major industry players said the move would provide more investors with a reason to purchase commercial property, by removing a major barrier of entry at a time when rising interest rates and debt costs had impacted affordability.
- ‘‘Right now there is a lot of offshore money poised to invest in a wide range of assets, including Build To Rent, and this could be a key element to tip them in favour of Melbourne,’’ said JLL Victoria capital markets director Josh Rutman.
- JLL’s Rutman said key questions to be resolved included whether the annual tax would be recoverable from tenants as an outgoing, and how multi-use properties combining retail, commercial and residential would be treated.
JLL Current & Forthcoming Melbourne CBD Opportunities
The JLL Melbourne CBD Sales team are delighted to provide you with a summary of our current opportunities below.
There are a number of new opportunities coming to market shortly both on and off-market, so please reach out to the JLL team to discuss any current requirement or mandate you have.
Should you wish to receive additional information, please contact any member of the JLL team for a confidential discussion.?
Stamp Duty & Land Tax Budget Changes – 2023/2024
Last week, significant changes to tax legislation were announced in the Victorian State Budget.
The Treasurer introduced a new COVID Debt Repayment Plan to help manage the COVID debt and increase revenue collection. The Plan involves a “COVID Debt Levy” to be shouldered by businesses and landowners for 10 years to 30 June 2033. The levy comprises the following two components:
- Increased land tax on taxable landholdings, and;
- Increased payroll tax for businesses with annual Australia-wide taxable wages above $10m
Our team has summarised the key takeaways in this new Land Tax and Stamp Duty legislation.
The relevant land tax measures announced are as follows:
- The tax-free threshold for general land tax rates will be cut from $300,000 to $50,000 (therefore subjecting more properties and property owners to land tax)
- A temporary fixed charge of $500 will be levied on general taxpayers with total landholdings between $50,000 and $100,000
- A temporary fixed charge of $975 will be levied on general taxpayers with total landholdings between $100,000 and $300,000
- For general (non-trust) taxpayers with total landholdings above $300,000 and trust taxpayers with total?landholdings?above $250,000, land?tax rates?will increase by $975 plus 0.1% of the taxable value of their landholdings
The above changes will commence from 1 January 2024 (i.e. the 2024 land tax year) and will apply until 30 June 2033.
Victoria’s Treasurer has announced a significant reform to Victoria’s duty regime, with duty on commercial and industrial properties to be replaced over time with an annual property tax.
Finer details of the new regime are still yet to be advised as the Government intends to consult with the industry before introducing the relevant legislation into Parliament. However, we understand the change will involve the following:?
- From 1 July 2024, commercial and industrial properties will transition to the new system as they are sold, with annual?property tax equal to 1% of the land’s unimproved value to be payable from 10 years after the sale transaction;
- The first purchaser of eligible property after 1 July 2024 will be able to choose whether to pay the final duty liability as an upfront lump sum, or as fixed instalments over 10 years together with an interest charge; and
- Once the property enters the new system after 10 years, no further duty will be payable when the property is sold, and the annual property tax will then apply moving forward.
This change will not apply to the current owner of any commercial or industrial property purchased before 1 July 2024.?
Should you wish to meet with the JLL Melbourne CBD Sales team to gain a clearer understanding of where the current market sits, we would be very pleased to have a coffee with you at a suitable time.
Nick Peden
Director
Head of JLL Melbourne CBD Sales
Capital Markets
JLL Melbourne
Level 40, 101 Collins Street
Melbourne, VIC, 3000
M +61 402 011 266
[email protected]
Senior Executive - Alternative Investments, Capital Markets at JLL
1 年Great insights Nick