Government slashes office space in the biggest city leasing deal in four years
By Nicole Lindsay
The Victorian government is slashing the amount of space it needs for city offices following budget and job cuts and an urgent need to tackle its climate change goals.
It has signed a lease for more than 18,600 square metres of office space in the new 10-storey, energy-efficient building named Victoria Place, on the corner of Victoria Parade and Lansdowne Street in East Melbourne.
Victoria Place, at 200 Victoria Parade, will have a NABERS 6-Star energy rating.
The latest state budget, released in May, included savings and efficiency targets for all government departments. Last week, the government revealed it is cutting more than 300 full-time Education Department jobs as part of a move to reduce the size of the public service.
It is understood that the government’s education office leasing mandate shrank to 18,648 square metres from an original brief of 20,000-25,000 square metres.
The 10-year Victoria Parade lease was inked by the Department of Treasury and Finance; however, it is understood to be on behalf of the Education Department, which is currently housed in multiple locations. It is the biggest office leasing deal in the city since 2019.
Education is expected to occupy levels one to seven, joining the Cancer Council of Victoria, which has signed up for 4420 square metres on levels 8 and 9. The Centre for Eye Research Australia will have 2137 square metres on level 10. Both smaller tenants have also signed 10-year leases.
‘If you want to get into any of the new generation [energy efficient] buildings, they are full.’
Andrew Beasley, Colliers leasing agent
Victoria Place is fully leased three months ahead of the completion of its final fitout. The first tenants are expected to move into the building over the next few months, with the Education Department to take up its space in the first half of 2024.
The federal government has committed to a 43 per cent reduction in carbon emissions by 2030 and the Victorian government is aiming for an even higher 45 per cent to 50 per cent cut by the same deadline. The new leasing deal will help the state accomplish its climate goals.
Victoria Place was originally to have a NABERS 5.5-Star energy efficiency rating, but the government’s interest in the building prompted its owners to upgrade it to a top-of-the-range 6-Star rating. So far, it has achieved a 6-Star Green Star Office Design rating, and is awaiting a rating on its 6 Star NABERS and Gold WELL certifications.
The 25,000 square metre Victoria Place work space connects indoor and outdoor spaces through floor-to-ceiling windows, giving uninterrupted views of the city and allowing fresh air and natural light to enter the building. New technologies fitted include artificial intelligence software to monitor energy performance and a rooftop solar farm.
The moves come as businesses and governments struggle to attract staff back into the office full-time, and as office values are slashed by their owners.
Colliers leasing agent Andrew Beasley, who negotiated the state government deal with Travis Myerscough, said despite negative market sentiment, the city leasing market remains busy. “We’ve got 32 new deals underway and there are new leasing mandates of 120,000 square metres of space in the market, all of it over 5000 square metres,” Beasley said.
The 25,000 sq m Victoria Place boasts sweeping city views.
“If you want to get into any of the new generation [energy efficient] buildings, they are full. The quality buildings, where money has been spent, are getting results,” he said.
Victoria Place was purchased for $330 million in February 2020 – just as the pandemic was getting underway – by a joint venture including Singaporean-based ARA Private Funds (now owned by ESR Australia) and Canadian-based QuadReal Property Group.
Developers Golden Age and Time & Place paid about $60 million for the site in 2016, proposing a new office building among a string of new properties in the East Melbourne-Collingwood fringe area.
ESR Australia boss Phil Pearce said challenging market conditions like Melbourne has experienced in recent years “often prompt a flight to quality”.
Other recent major CBD office deals include two at Charter Hall and GIC’s new tower at 555 Collins Street, which is now 70 per cent pre-committed.
Ericsson is moving out of Docklands into three floors covering 3350 square metres, and co-working group Hub is taking another three levels. Also recently announced was CBA’s 15,000 square metre lease at Cbus’ new 60,000 square metre tower at 435 Bourke Street.
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