Vantage Defies Market Trends
1 October 2024
Vantage Defies Market Trends with Near-Full Occupancy at 574 St Kilda Road Amidst Melbourne’s Vacancy Surge
(Melbourne, 6 September 2024) – In a market characterised by heightened vacancy rates and increasing rent incentives, Vantage Property Investment is proud to report a remarkable success story for its asset at 574 St Kilda Road. The iconic office building, which underwent extensive refurbishments following its purchase in 2020, now boasts an impressive 96% occupancy rate, despite broader market challenges.
A Strategic Investment Amidst Challenging Market Conditions
Acquired by Vantage in 2020 on behalf of a forward-thinking investor group, 574 St Kilda Road was purchased with a 50% vacancy rate. Since then, Vantage has undertaken a comprehensive refurbishment program, upgrading the building forecourt, entrance lobby, and introducing a high-end business lounge, tenant gymnasium, a state-of-the-art golf simulator, and electric car charging stations.
This proactive asset management approach, coupled with in-house project management capabilities, has significantly influenced tenant decisions, making 574 St Kilda Road one of the most sought-after addresses in the St Kilda Road precinct.
A Market Challenged by Rising Vacancy Rates
Since the onset of the COVID-19 pandemic, office vacancy rates have surged across Australia, with Melbourne’s St Kilda Road precinct experiencing some of the highest vacancy levels. By the end of 2023, the vacancy rate in the precinct reached 27.5%, according to the Property Council of Australia (PCA), although some agents, including Colliers, believe the true figure could be as high as 40-50% in certain areas.
“The St Kilda Road precinct has faced significant challenges with elevated vacancies and rent incentives,” said a spokesperson from Colliers. “Incentives for A-grade office space have risen to 49%, while B-grade incentives are now at 53%. Despite this, there is no new office supply expected in the precinct, with recent additions being primarily refurbishments rather than new developments.”
574 St Kilda Road Defies Market Trends
In stark contrast to the rising vacancy rates across the precinct, 574 St Kilda Road has seen remarkable leasing success. From its purchase to the end of 2023, Vantage successfully renewed or leased 2,142 sqm, representing 30% of the net lettable area (NLA), with only one tenant vacating. In 2024 alone, Vantage has secured five new lease deals totalling 2,668 sqm, or 37% of the NLA.
“The success of 574 St Kilda Road can be attributed to a combination of strategic upgrades and an unwavering focus on the tenant experience,” said a spokesperson from Vantage Property Investment. “We’ve created a building that goes beyond standard office spaces by offering amenities like a high-end business lounge, gymnasium, and golf simulator, all of which have proven instrumental in securing new leases.”
Leading the Market with Superior Tenant Engagement
Vantage’s approach to tenant engagement has been key to its success. Every potential incoming tenant is personally engaged by Vantage, ensuring a strong connection from the outset. The upgraded forecourt and lobby, designed to A-grade standards, have set a new benchmark in the southern end of St Kilda Road, rivaling some of the most prestigious office spaces in the CBD.
The business lounge, in particular, has been a standout feature, allowing tenants to hold informal meetings and training sessions without the need for additional leased space. This has resulted in significant cost savings for tenants and has been cited as a primary reason for lease renewals and new deals.
“Our hands-on approach and focus on providing a tenant experience akin to that of a luxury hotel have differentiated 574 St Kilda Road from the competition,” added the Vantage spokesperson. “In a market where incentives and vacancies are on the rise, we’ve focused on creating a unique and premium environment that continues to attract high-quality tenants.”
Looking Ahead: A Positive Outlook for Commercial Office Space in Melbourne
Despite the broader market challenges, Vantage remains optimistic about the future of 574 St Kilda Road and the St Kilda Road precinct. The successful leasing activity at the building demonstrates that with the right asset management approach, quality upgrades, and a focus on tenant experience, office buildings in this precinct can continue to thrive.
As Melbourne’s commercial office market evolves, Vantage Property Investment is committed to leading the way with innovative solutions and a relentless focus on delivering exceptional tenant experiences.
Source: Property Council of Australia (PCA), Colliers Research