Top tenants fill towers at Quay Quarter, 80 Collins Street

The run of deals in each city, put together by Colliers International and CBRE, are resounding in both markets which already have vacancy ratesat their lowest levels in a decade.

The big squeeze has driven up the cost of space and its value for its owners, with major landlords booking in hefty revaluation gains.

Largest rental growth globally

Underscoring the point, Melbourne and Sydney are expected to experience the largest rental growth globally in 2019, with rents forecast to rise 10.1 per cent and 8.6 per cent respectively, according to a Knight Frank report.

Prime rents have been rising rapidly in both cities, up by 11.9 per cent in Sydney and 13.9 per cent in Melbourne over the past year.

“2018 saw a supply crunch in both Sydney and Melbourne with dwindling availability and robust absorption, particularly in Melbourne, driving a surge in office rents,” said Knight Frank research head for Australia, Ben Burston.

“With a subdued pipeline of development completions yet again in 2019, and sustained demand-side momentum, there is a compelling case for further growth this year.”

That’s good news for investors including the two AMP Capital property funds and super fund Rest which own the Quay Quarter project, which is due for completion in 2022.

“Not only do we welcome a world-leading professional services customer into this transformational development, but with the majority of the tower now leased, this is also a great outcome for QQT’s investors,” said Carmel Hourigan, AMP Capital’s global head of real estate.

For QIC’s real estate arm, the rising rents and the filling tower in Melbourne are also very welcome as it ramps upits search to win investors into its overall developmenton the site –Singapore’s SilverNeedle will operate the boutique hotelin the project – along with an existing 52-storey tower there: in all, close to a $2 billion opportunity.

“80 Collins represents a once-in-a-generation opportunity for us to create a multi-purpose place of lasting appeal because office space in the top end of the market is scarce,” said the acting managing director of QIC Global Real Estate, David Asplin.

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