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News release


The Prime-Grade office market in the Sydney CBD is being pulled west

The completion of Barangaroo South will see approximately 30% of the Prime-Grade office space in the Sydney CBD located in the Western Corridor by 2016

SYDNEY, 14 November 2012 – Jones Lang LaSalle has found that Sydney’s Western Corridor will account for approximately 30% of the Sydney CBD Prime-Grade office market by 2016.

In a report titled, “Will Barangaroo lead to a re-rating of the Western Corridor?” Jones Lang LaSalle undertakes an analysis of the Western Corridor and explores the potential for a structural uplift in A-Grade rents in the area.
Jones Lang LaSalle’s Tim O’Connor, NSW Head of Office Leasing, said the International Towers at Barangaroo South, which will comprise 285,000 sqm of commercial space upon completion, has set a new benchmark for rents in the Western Corridor.
“Market rents in the Sydney CBD are determined by the individual characteristics of the asset and market conditions. The development at Barangaroo South will pull the geographical centre of the Sydney CBD office market further towards the Western Corridor, and increase the potential for higher A-Grade rents in the area.
“We estimate structural rental increases could be in the order of 20% for the highest-quality A-Grade assets and approximately 15% for mid to lower quality A-Grade assets over the next 3-5 years,” said Mr O’Connor.
A potential rent re-rating of the Western Corridor is not explained by one factor but the combination of multiple factors.
Mr O’Connor said, “A key driver will be infrastructure improvements. The state government’s recent announcement about further upgrades to infrastructure is also going to boost the appeal of the Western Corridor for potential tenants.
“The NSW state government recently approved the Wynyard Walk infrastructure, to be completed in 2015. This is designed to allow pedestrians to walk directly between Wynyard Station and the Barangaroo waterfront.
“Wynyard Walk is set to reduce pedestrian journey times from the Wynyard Transport Hub, improving the accessibility and amenity of the Western Corridor over the next five years.
“Barangaroo will also increase the depth and quality of the retail offering in the Western Corridor, with approximately 6,000 to 6,500 sqm of retail space in the first stages,” Mr O’Connor said.
There are only 97 Prime-Grade buildings in the Sydney CBD. Of those Prime-Grade assets, 27 (totalling 702,100 sqm) are located in the Western Corridor.
Based on Jones Lang LaSalle’s medium-term supply assumptions, the Prime-Grade market in the Sydney CBD will be 3.23 million sqm in 2016. The Western Corridor will be just over 1.0 million sqm by the end of 2016. The precinct will, therefore, account for 30.6% of the Sydney CBD Prime-Grade market – 5.0 percentage points more than mid-2012 (25.6%).
Jones Lang LaSalle’s Paul Noonan, Director, NSW Sales & Investments said, “The increased depth of the Prime-Grade market, infrastructure improvements and better quality covenants have sharpened investor interest in the Western Corridor. There are a number of investors looking for exposure to the Western Corridor sub-market.
“Investors are considering the potential for a structural rent re-rating of assets in the Western Corridor. This re-rating should support the potential for above benchmark returns over the short to medium term.
“The discount to NTA for major A-REITs has narrowed significantly over the past 12 months. Furthermore, A-REITS, and domestic wholesale funds, are benefiting from a lower cost of capital and the number of buy mandates from these groups has increased noticeably over the past six months.
“Interest from offshore capital in Sydney CBD new generation prime grade buildings remains strong and Sydney is expected to continue to be the most sought after market for offshore equity,” concluded Mr Noonan. ​