How would you characterise your market at the moment?
The first quarter of 2012 has seen continued subdued activity levels across the sub urban landscape. Whilst there have been some major transactions in the market, the majority of these are deals that have held over from 2011.

Are there any trends you are noticing among the tenants you are talking to?
Tenants are continuing to rationalise their occupancy requirements and are mostly opting to refurbish their existing premises rather than seek a new property and new fit out. It is still difficult to convince tenants of the merits of moving.

What do you think will be the biggest influence on your market in Q2?
Confidence is everything at the moment and many businesses are lacking it. We expect that some activity will increase in the later part of the year as the market rebounds.

What will rents and incentives do in Q2?
This year, we have seen softening incentive levels and it is taking a little bit more to do the same deals as last year. We have seen rent plateau and should experience a slight decline as we move into the 2013 period. More sub lease space is predicted to enter the market, in particular 11,000 sqm in Hawthorn as a result of BUPA moving into the city.

What should landlords do to adapt to these market conditions?
Landlords need to continue to be flexible with tenants that come to the market and be prepared to contemplate shorter lease terms in order to get the deals done. In this climate, many tenants will opt for shorter-term leases to allow for greater flexibility in their medium term growth.

Joshua Tebb
Director, Leasing, Victoria
joshua.tebb@ap.jll.com

Recent Leasing Deals

• BlueCross leased 1,580 sqm at 117 Camberwell Road, Hawthorn East.
• Eastern GP Services leased 1,528 sqm at 6 Lakeside Drive, Burwood East.
• Toll Holdings leased 2,500 sqm at 352 Wellington Road, Mulgrave.

Key Indicators

Market Balance, as at 2012

Download a PDF of the Melbourne South East Q112 Market Overview