Leasing activity has stepped up in city fringe markets as vacancy rates tighten across Melbourne.
Chinese IT giant Huawei Technologies will move from St Kilda Road to just off the boulevard in South Melbourne after signing a lease for 1295sq m at 111 Coventry Street.
Huawei, a global telco network equipment manufacturer, took the fully fitted office on terms of about $450 to $500 per sqm in a three-year deal negotiated by Colliers International's Vincent Tran.
Another full-floor space in Perth-based syndicator Primewest's building at 616 St Kilda Road was taken by fast-growing pub group Dixon Hospitality on terms believed to be above $300 per sqm net.
That deal, through Lemon Baxter's Chris Curtain, saw the group consolidate to No. 616 from at least three other locations.
The Property Council of Australia puts the area's vacancy among the city's highest at 13.2 per cent.
Mr Curtain said Lemon Baxter calculated vacancy at 6 per cent, partly because the boulevard had seen multiple offices being converted to luxury residential apartments.
Several buildings counted by the PCA, such as 412 St Kilda Road, which contributes about 4 per cent of total vacancy, were set to be redeveloped.
Tenants tended to stay in the area attracted by easy access and cheaper car parking, said Colliers' Matt Cosgrave. "It's still a pretty popular office market."
324 St Kilda Road had probably the largest vacancy on the strip with 4500sq m contiguous space, he said.
A large portion of secondary stock had been taken out of the market due to residential conversions and vacancy has tightened as a result.
Mr Cosgrave, along with Mr Tran and Lucy Martin, negotiated a 10-year lease for recruitment specialist Bayside Group over 1342sq m on level three at 484 St Kilda Road.
Vacancy has also tightened off the strip in South Melbourne.
Cushman & Wakefield's Edward Maas said empty offices in the area had fallen from 9.3 to 4.1 per cent by the end of last year.
"The South Melbourne office leasing market has become very tightly held, with existing tenants rolling on lease options and essentially locking out tenants looking for space in the area," he said.
Sales firm Maverick Rose recently leased 725sq m on level 1 at 280-286 Coventry Street and ad agency Zoo Group took 260sq m at $351 per sqm at 5 Union Street.
ZOO Group managing director and partner Matt Rose said the number of industrial and warehouse properties in South Melbourne that had potential to be converted into flexible, creative work spaces had attracted the firm.
Activity has also stepped up in newly created offices in South Yarra.
Tenix Solutions, WP Brands, Fastman and Coretec have taken up three-year leases at Claremont Manor, the newest building to be completed in the Forest Hill precinct.
Colliers' Ash Dean said the group had leased 85 per cent of the commercial division of the building since it was completed, achieving an average net rent of $416 per sqm.
Another agent, Chris Meehan, said limited new office supply in South Yarra, paired with low vacancy rates, had helped capitalise on the strong market conditions.
"We were able to complete the four leasing transactions for a total of more than 786sq m of office space," he said.
