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News release

Sydney

Companies heading to the CBD prove it’s still a tenant’s market

Companies take advantage of 25% - 30% incentives to relocate closer to clients.


Sydney, 19 May 2011 – There has been a lot of movement in the Sydney CBD over the past six months with a number of high profile companies moving to CBD offices.

According to Tim O'Connor, NSW Head of Leasing at Jones Lang LaSalle, enquiry levels for office space in the Sydney CBD increased in Q1 as companies looked to upgrade their premises.

"Leasing activity and enquiry levels in the Sydney CBD have continued to build since the start of the year as companies explore opportunities to upgrade their work environment, image and amenities for staff. While consolidation has been the initial instigator for a number of the recent moves, an increase in finance and insurance sector employment of 8.4% in the three months to February certainly bodes well for new leasing demand in the CBD," Mr O'Connor said.

Ben Kardachi, Director of Office Leasing, at Jones Lang LaSalle said major companies are seizing the opportunity to move to the CBD while healthy incentives are still on offer and gross effective rents are relatively low.

"We have seen a number of larger companies relocate to the Sydney CBD in the past 6 months. It's still been a tenant’s market with high incentives and relatively low rents across the CBD when compared with historic levels. With vacancies now tightening and rents forecast to rise steadily from later this year, tenants are taking advantage of the market conditions and relocating to quality office accommodation in the CBD before the rent rise kicks in," Mr Kardachi said.

Fast-growing online discount company, Jump On It, moved to their new office at 37 Pitt Street in December 2010 in a lease arranged by Jones Lang LaSalle. "We have seen rapid and substantial growth in the online discount coupon industry which has seen a change in their real estate needs. Jump On It found that they required four times the amount of space and were able to increase their rental profile in order to be located in the CBD as a means of assisting in attracting and retaining staff."

Last month, Walt Disney moved from a multilevel office in McMahon’s Point to a single floor plate office space of approximately 1800 square metres in York Street.

In leases organised by Jones Lang LaSalle, the Medich Group and Mac Services Group moved from their existing offices on the city fringe into the CBD. The Medich Group moved into 250sqm of office space at 155 George Street from Leichardt whilst Mac Services Group moved to a 1,070 square metre office at 10 Bond Street from Rosebery.

April also saw HRX Recruitment move to a fitted-out sub leased office of approximately 1,100 square metres at 70 Phillip Street. Mr Kardachi, who organised the lease, said "this was a well-timed and strategic move for HRX Recruitment. They’re main motivation to move to the Sydney CBD was to be closer to their major clients, however the inclusion of a fit-out, a shorter lease term to assist with growth projections, and an effective rental structure assisted in helping the relocation to the CBD stack up."

Next month, Harper Collins will be relocating from its current premises in Pymble, where they have been for 20 years, into 2,400 square metres over two levels at 201 Elizabeth Street. "This move highlights that many major tenants, regardless of their industry type, have a preference to be located in the in the Sydney CBD, in order to satisfy staff accessibility, while providing convenient proximity to their client’s and end users " said Mr Kardachi.

According to Nick Crothers, Director of Research and Consulting at Jones Lang LaSalle, demand is likely to remain strong over the next 12 months.

"Demand for office space in the Sydney CBD is forecast to remain solid over the next 12 months, supported by economic fundamentals, even though net absorption in 2011 is expected to be lower than the bounce from the recovery of 2010. Sydney CBD office availability will decline over the next three years and the rental upswing is expected to gather pace as landlords recognise the declining options for tenants. Tenants are moving now before the market shifts in favour of the landlords." Mr Crothers said.