Cashed up private equity and investment banking firms demanding premium office space are causing a shortage of such real estate in Australia's largest cities.
The rocketing demand has prompted real estate agents to approach companies occupying some of the most attractive central business district locations to persuade them to vacate for higher paying tenants, according to leading commercial real estate firm Colliers International.

"It is something we have always done, but we are only getting real leverage with it now," Colliers New South Wales state director of office and retail leasing Cameron Williams said.

He said the situation was particularly apparent in Sydney, where companies such as investment bank UBS were expanding and taking on large numbers of staff.

There are also shortages of premium office space in Brisbane and Perth.

Investment banks, law firms and private equity outfits want top-of-the-range offices, but can't get the large space they need.

"In Sydney, demand is in the north east of the central business district," Mr Williams said.

"There is enormous growth of investment banks, private equity firms and companies like Babcock and Brown.

"When it comes to office space, they are not cost conscious ... they want a sort of office and they just go for it."

Many are looking for over 2000 square metres of high quality office space, which costs over $950 per square metre.

While rents have only started to increase, Mr Williams said inducements to take leases have fallen dramatically.

"There are a lot of tenants looking for that space in the market place," he said.

The trend has prompted more firms to sign lease agreements for proposed buildings off the plan.

Currently, Commonwealth Bank of Australia is looking to sign a lease deal on an office block yet to be built, as was law firm Clayton Utz, which is currently working with property developer Mirvac Group, Mr Williams noted.

The trend was also causing companies that did not necessarily have to be in the central business district to move out.

Engineering firm GHD in Bond Street in Sydney's centre is looking to move as is beer company Lion Nathan, currently in Hunter Street.

Both companies have more than 5,000 square meters of office space.

"They are cyclical tenants that are finding at the moment it is too expensive for them to stay in town," Mr Williams said.

Colliers New South Wales director of investment sales Jon Chomley said there are currently four German companies looking to buy top quality office space in Australia's cities.

"They want low risk, newer buildings with long term leases and they will pay well for them," he said.

"The Germans will only go so far in terms of their yield, between six and seven per cent, where as the Australian companies will go lower."