[+] ‘Bulletproof’ Cremorne Defies Office Sector Slump

For Adidas—the second-biggest sportswear maker and the owner of arguably the three best-known stripes in the world—Christmas can’t come soon enough. By the end of next month, Fortis Development Group expects practical completion of its $130-million, eight-storey office building at Dover Street, in the inner-city suburb of Cremorne. And Adidas will move its Melbourne headquarters north to the 2726sq m it has taken on levels six and seven of the Fieldwork Architects-designed building. The German sportswear company will take another 400sq m on the ground floor for a retail outlet for its shoes and apparel. And it’s acquired naming rights—its famous logo will adorn the top of the building. Office sector uncertainty? What uncertainty? Cremorne—the tiny suburb just 3km upriver from downtown Melbourne—is defying the naysayers and, for now at least, the downturn in the office market . When Adidas moves to the once working-class and industrial suburb of no more than a single square kilometre, it will join other big corporations including Seek, Tesla, Carsales.com, the Walt Disney Company, REA Group, Domain, Reece and MYOB. ▲ Fortis Development Group’s new headquarters is almost complete but it will be Adidas that has its name up in lights. Main image source: Kylah Smith Fortis says it expects the building at 65-81 Dover Street will be fully leased by completion. Town planner Ratio has committed to floor space as has the co-working space provider, Commons. And Fortis’s parent, Pallas Group, is also expected to make it their new headquarters. “This project has been a great success for us,” says Fortis senior development manager Jordan Winada. So successful in fact, five months ago Fortis quietly closed on 665sq m right next door—at 85 Dover Street—reportedly paying $10.25 million for a three-storey,10-unit strata title commercial and residential block. “That one was a no-brainer for us,” Winada told The Urban Developer last week. “We purchased 65 Dover Street on the basis we thought it would go quite well but it’s outperformed everyone’s expectations. “We’re very happy with what we’ve done there so it makes sense for us to take on that site next door.” Fortis has development approval for eight storeys on the site and construction will begin in the second quarter of next year. That will take the net-lettable area of the two buildings to about 12,500 square metres. They will share basement parking. Cranes dot the skyline of this suburb that is hemmed in by the Yarra River, Punt Road, Swan and Church Streets, and divided down the middle by the railway to South Yarra. ▲ Pace has signed an agreement with the San Telmo group for a rooftop restaurant to be called Amatrice at its Cubitt Street development. In fact, Nose to Tail—a creative agency with a focus on property and development—counts more than a dozen office projects in the neighbourhood either under construction or in the planning stage. Come May next year, the long-time Cremorne resident will move less than 200m down the road to 4-6 Cubitt Street, where Pace Development Group has just topped-out their own nine-storey building, with 315-480sq m floor plates. Its crane, at least, will disappear in January. The collaboration between JCB Architects and Splinter Society is about 40 per cent leased, according to Pace head of commercial and legal Pete Micevski. He says they will move their own headquarters to Cremorne, bringing together separate operations now in Fitzroy and St Kilda. He expects the remainder of the space to be leased before move-in date. “Generally, we see leasing activity ramp up in the three to six months immediately prior to practical completion,” Micevski says. “So we expect the balance of the lots to be leased anywhere between now and the end of March or April.” Known as “Silicon Yarra” in recent years (Cremorne contributes $4 billion to the Victorian tech economy each year, according to the Department of Jobs, Skills, Industry and Regions) it now seems everyone—not just the tech industry—wants to be in and around the neighbourhood. Developers have seized on the moment. ▲ JLL associate Matt Szakiel: Cremorne is about more than just the location. Just 130m from Pace Development’s build, Little Projects has its own nine-storey office tower under construction at 38-40 Cubitt. The DKO-Architects-design will deliver 8500sq m and some ground-floor retail. And 200m on from that, in May this year diversified developer Time &amp; Place and joint-venture partner MaxCap Group won development approval for yet another nine-storey office tower on a 2678sq m site at 75-119 Cubitt Street. Three blocks east, Bill McNee’s Vicland Property Group has also been greenlit by Yarra City Council, this time for 10-storeys of office and retail space on a big 3500sq m site at 31-53 Cremorne Street. It acquired the site from Blazer Clothing founder Peter Murray, paying $53.5 million in 2021. Construction is due to finish in 2025. Boutique property developer Monno is building a $65 million, eight-storey office block at 22-26 Gordon Street and billionaire property developer and majority shareholder in the National Basketball League Larry Kestelman intends to move the NBL’s headquarters into the eight and four-story complex he plans on a 9628sq m site at 68-88 Green Street. The list would appear to be endless. The obvious attraction, according to JLL associate Matt Szakiel, is the location. ▲ Time &amp; Place and joint-venture partner MaxCap Group have won development approval for a nine-storey office tower on a 2678sq m site, also in Cubitt Street. There are trams along Swan and Church streets. Richmond Station—just one stop from Melbourne’s Flinders Street Station—is a seven-minute walk away. The Yarra River, with its walkways and bike paths, is just a stone’s throw. And Melbourne’s weather notwithstanding, the central business district is a 20-minute walk. The MCG, John Cain, Rod Laver and Margaret Court arenas, AAMI Park and the city’s Royal Botanical Gardens are all within walking distance. As are countless pubs, bars, restaurants and cafes. “Cremorne development was a success when it first kicked off because of the surrounding amenity to all of those buildings,” Szakiel says. “The need for, I guess, a social life outside of the professional life ... they’re now sort of blending together as well. “It’s a thriving area as far as the food and beverage offerings, and the retail offerings, are concerned. It brought tenants, not only from the metropolitan areas like Mulgrave, Burwood, Burwood East, it also brought tenants from the CBD out.” There was a time, says Szakiel, when Cremorne was known by local residents as “a donut”—plenty of bars and restaurants on the outskirts, but an empty hole in the middle. That’s changing rapidly, as employers try to get workers back to the office in a post-Covid world. Pace has signed an agreement with the San Telmo group—which boasts a handful of South American-themed steak restaurants around the city—for a roof-top restaurant to be known as Amatrice. And there’s also a ground-floor cafe and restaurant planned for the Cubitt Street building. ▲ Little Projects has a nine-storey office tower under way at 38-40 Cubitt Street. “It’s at a time now where employers need to offer more than just a fancy-looking office,” says Pace’s Micevski. “They need to offer health and well-being amenity within the immediate precinct, if not the building.” For its part, Fortis plans a high-end Japanese restaurant and wine bar, as well as a cafe-bakery on its ground floor. They will lodge an amendment seeking weekend trading for their retail, food and beverage spaces. “You’ve got a captive audience in the residential area scattered throughout Cremorne,” says Winada. “And then you have the support of the commercial office buildings through the week. “But weekend trading is a natural evolution of that suburb.” Monno’s Gordon Street development is understood to include a restaurant and Little Projects has plans for a wine bar on its ground floor. Pace will focus on public transport for its development. If tenants do wish to use a car, they can rent one from a car-share company that will have dedicated space within basement parking. Fortis is offering an in-house digital content creation studio—for podcasts, green-screen recordings and photography—and their end-of-trip facilities will include a sauna. Others plan roof-top basketball courts. Amenity aside, rental costs have been another key attraction, according to Szakiel. “Tenants that were paying upwards of $800 or $900 a square metre, net, in the city could suddenly be one stop away, via Richmond station, from the city but paying hundreds of dollars in net rent less than what the CBD was offering,” he says. And Cremorne has land supply. JLL head of office institutional sales Paul Kempton says although suburbs such as South Melbourne, Carlton and Collingwood will always be good fringe office markets they are restricted in how much stock they can accommodate. ▲ Boutique property developer Monno is building a $65 million, eight-storey office block at 22-26 Gordon Street. “Whereas Cremorne can actually accommodate a much larger scale of stock,” he says. “It’s up to 400,000sq m now but can probably go up to a million square metres, to be honest, over the next 10 to 15 years. “And it will all be tenant-demand lead because the land’s there.” Kempton is part of a JLL team brokering the sale of a former textiles warehouse , which sits on an 8320sq m island site in Cremorne Street, with four street frontages and commanding views of the Melbourne cityscape. The property could fetch $80 million to $100 million via an expressions-of-interest campaign. How long Cremorne can continue to defy the general state of the office sector is not clear. Melbourne’s CBD is fighting back, with some tenants reportedly negotiating 70 per cent discounts on office rentals in Docklands, and between 45-50 per cent discounts on prime East End assets—that area at the top end of Collins and Bourke streets. And while Szakiel is confident workers will return to offices in sufficient numbers, he warns the fallout from economic headwinds buffeting the industry could affect landlords and tenants. “The way things are going, and the way construction costs are going—the trajectory that they’re heading on at the moment—it will be very hard for anyone that hasn’t got deep enough pockets to be able to get the funding,” he says. “Those that are relying on investment to get these things out of the ground, are going to find it quite difficult in the short term. “That flurry of developments we’ve seen in the past 12 months may slow, there could be a bit more of a shortage over the next few years as far as new builds are concerned. “And those businesses that are holding back on determining what their ultimate work-from-home strategy will look like are going to need to make their minds up fairly quickly.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. 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[+] ‘Bulletproof’ Cremorne Defies Office Sector Slump

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