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News release

Sydney

Limited options across the North Shore

There are few options for large space users, while residential conversions will displace tenants over the next three years


JLL Research has just released a new research report looking at the North Shore office markets.

The report revealed that the North Sydney vacancy rate has remained unchanged in Q1 (9.1%), below the 15 year average of 9.5%.

Paul Lynch, JLL Head of Office Leasing at North Sydney said, "It is important to read behind the headlines of the North Sydney vacancy rate – there are few options for good quality contiguous space and larger users typically are reviewing options across the North Shore and the city."

The prime grade vacancy rate in North Sydney was 7.0% in Q1. However, vacancy was fragmented with limited availability for 2,000+ sqm of contiguous space.

Mr Lynch said, "Most businesses located in the North Shore are here for commercial reasons, proximity to customers/suppliers and workforce. Tenants chose this location for amenity and because they enjoy the working life North Sydney and the North Shore provides."

"The CBD is considered a bridge too far for many companies. A high proportion of workers based in North Sydney reside on the North Shore and a relocation to the CBD can lead to longer commute times and a disruption in their work/life balance," said Mr Lynch.

The last new development in North Sydney was the Ark at 40 Mount Street and the next delivery will not be until 2016 with the completion of 177 Pacific Highway.

Andrew Ballantyne, JLL National Director of Research in Australia explained, "Developer demand for office assets with adaptive reuse potential is strong. 168 Walker Street was acquired by Aqualand in early 2015 and is likely to be redeveloped into residential."

"Strong population growth across the North Shore generates underlying demand for residential units. We expect there will be further acquisition of office stock for conversion over the next three years," said Mr Ballantyne.

JLL's numbers also show that Sydney has recorded stronger effective rental growth than the Sydney CBD post the financial crisis.

Mr Lynch stated, "Whilst we compete in ways with the higher incentives available in the CBD, the value proposition of North Sydney remains and we are witnessing healthy tenant demand for limited quality options".

"Still, the recovery in CBD leasing markets and prospect for effective rental growth supports our proposition that effective rents will grow above trend from the latter part of 2015 in North Sydney," concluded Mr Lynch.