Richmond and Cremorne are cementing their position as Melbourne’s own Silicon Valley hub, as leading technology and start-up tenants continue to flock to the city-fringe precinct.
According to CBRE’s latest Viewpoint, ‘The Evolution of Richmond and Cremorne’, occupiers are being drawn to the area’s proximity to the CBD, characteristic buildings, strong cultural opportunities available and access to key amenity that ultimately appeals to top industry talent.
SEEK, CarSales.com and REA Group are among the major firms moving to the precinct, while a sharp rise in co-working spaces is further establishing the area’s reputation as Melbourne’s creative tech-hub.
CBRE Research Manager Anne Flaherty said an additional 3,000 jobs per annum are anticipated over the next 15 years for the municipality, with the growth driven largely by the arrival of creative and technology office tenants.
“Technology and co-working firms are less likely to identify with the polished corporate culture associated with the Melbourne CBD. Instead these companies are looking to occupy buildings with character – for example, industrial heritage buildings that provide a distinct branding opportunity. This type of occupier is also after a location with a strong culture of innovation, plus decent access to transport links and popular hospitality and retail strips,” Ms Flaherty said.
“Companies are increasingly focused on attracting and retaining the best talent and as a result are often willing to pay higher rents for a location that appeals to employees. In conjunction with more traditional demand/supply fundamentals, it is this mentality that has allowed rents to grow so quickly.”
A key indicator of Richmond and Cremorne’s growing appeal is the recorded rent and job growth. The Viewpoint noted between 2016-2017, rents in the Richmond-Cremorne area rose by 20%, outpacing other city fringe office markets. Meanwhile, in the five years to 2016 an additional 13,470 jobs were created within the City of Yarra.
Josh Jennings from CBRE’s Office Leasing division said: “Previously, South Yarra and South Melbourne were the fringe’s strongest performing office markets. These have now been surpassed by Richmond and Cremorne with higher tenant demand and enquiry costs recorded in these suburbs.”
“Tenant interest is now coming from further afield and not just other city fringe areas, with Cremorne having pulling power from Glen Waverley, Burwood and even Burwood East’s Tally-Ho.”
The report stated rents in Cremorne and Richmond are expected to continue outperforming their city-fringe counterparts, as more companies take occupancy in the near term.
Notably, developers are also catching on to Melbourne’s innovation hub and the opportunity to tap into the significant rental growth, as highlighted by the number of office development applications received by the City of Yarra.
In the year to September 2017, 202,368sqm of development applications were either approved or under assessment – up 220% year-on-year. In addition, the average size per development application has risen from 640sqm in 2013 to over 6,000sqm in 2017, causing land values to rise rapidly over the past five years.
CBRE Melbourne Middle Markets Director, Scott Orchard, added: “Cremorne has to be one of the most talked about office precincts in the country among occupiers. Evidence of this is not just in the rental growth, but also the leasing pre-commitments and the high number of planning approvals submitted by developers. Leasing confidence in the market is fueling speculative building activity and even major ‘off-the-plan’ investment sales, underpinned by rental guarantees.”
“Its popularity with tenants has meant the usual appeal of this market has gone well beyond Melbourne, with one of the latest transactions being the sale of 116-124 Balmain Street to a Sydney-based investor. The area is also garnering greater international attention, particularly from active Asian capital, which is making up a more significant percentage of enquiry this year.”
David Minty from CBRE’s Victorian Development Sites team concluded: “The average land rate for development opportunities has escalated in the precinct to effectively double since 2015, with rates growing from $6,000 – $7,000sqm to now over $13,000sqm.”