Sydney CBD continues to strengthen as a landlords market. Positive face and effective rental growth is being experienced in all grades and locations within the city, as business confidence converts into organic growth and the displacement of up to 380 tenants turns from potential into reality.
An Elephant – big, strong and limited (availability)
Finance, tech, second tier legal and pharmaceutical
Brexit and the US economy continue to be the most talked about factors, but the expectation is that neither will materially impact the Sydney CBD market in a negative way.
2017 is the first year of the drought of office space in Sydney’s CBD. With no new supply coming to market next year conditions for tenants will only become more challenging with limited options and tightening deal metrics.
Head of Leasing - NSW
+61 2 9220 8721
Across North Sydney we are seeking strong enquiry across all size ranges. The NSW Governments Metro Rail project is having a significant impact on market absorption, matched by tenants seeking expansion space and the continuing conversion of secondary (C & D grade) office stock to residential use. Interestingly, we are also seeing a definitive increase in enquiries (particularly sub 500sqm users) looking to North Sydney from the Sydney CBD.
The appetite for residential projects (particularly by overseas investors) in proximity to the CBD has resulted in a number of small and large office buildings receive DA approval for residential use in both North Sydney and St Leonards. Again, the NSW Government’s announcements on improved infrastructure has had substantial influence on the North Shore.
Without doubt, the continued improvement in office market fundamentals will bring substantial and quantifiable benefit to the three key markets of North Sydney, St Leonards and Chatswood. There will be a shortage of good quality options for tenants, which will benefit both prime grade buildings and well-presented secondary buildings. To date in 2016, we have seen effective rental growth in some some market sectors of nearly 5% - we expect this improvement will continue across all key North Shore sub-markets as a result of increasing face rents and marked reductions in incentives.
National Director, Leasing - NSW
+61 415 909 871
Optimism regarding Walkers Parramatta Square development of over 100,000 sqm of commercial accommodation is the topic of the week, namely Who will occupy and for how much. What will the effect of CBA exit mean for the overall office market.
Enquiry tends to have waned to the mostly smaller local occupiers continuing to move away from landlords considering redevelopment of older stock into residential. Unfortunately, with vacancy recorded at 4.4% the outlook for Larger enquiries is challenging in the near term.
A Bear, quiet capable if it could be coaxed out of its sleepy cave.
The move away from residential redevelopment. Larger services firm positioning themselves for growth.
Residential redevelopment throughout the Sydney market
A complete lack of stock in Parramatta to break record vacancy levels will push Parramatta into a new phase of construction. Tenants will be pushed towards Business Parks spurning new supply in these areas with tighter turn around times on delivery of big floorplates.
New rental levels will be achieved on Premium and A Grade buildings
Australian Unity to 56 Station Street, 1,509 sqm at $380 net
Associate Director, Leasing - Parramatta
+61 2 9806 2800
Wallaby, as it’s bounding ahead at the moment.
Demand for office space in Macquarie Park is currently driven by tenants being displaced from their existing locations due to residential conversion, and the withdrawal of existing office stock. Merger & acquisition activity is also driving demand with companies co-locating from multiple sites across Sydney.
Sydney Olympic Park, Rhodes & Macquarie Park continue to offer large floor plates at affordable rents within the Sydney metropolitan market, and tenants are continuing to capitalise on this.
Total vacancy in Macquarie Park is expected to remain in single digits as the supply pipeline remains relatively subdued with construction commencement strongly correlated to pre-commitments. Positive rental growth in the short term will be sustained by limited supply, continued low vacancy, declining incentives and improving leasing demand.
Both Rhodes and Sydney Olympic Park are enjoying low vacancy rates but this will change with the Commonwealth Bank of Australia (CBA) relocating from their current premises. This will leave a significant amount of backfill space and as a result, vacancy could rise further in the medium term in the Sydney Olympic Park market.
Regional Director - NSW
+61 2 9936 5876
Sloth. Very attractive to tenants but slow!!
Tenant enquiry is limited, however the enquiry that is active is reflective of the high levels of vacancy and incentives offered across the market, enabling tenants the potential opportunity to reset their business in better quality accommodation at cost effective rates.
Not specifically. We continue to see reminisce of the mining sector downturn, while business confidence remains low.
The market will continue to be challenging over the next 12 to 18months as the Premium vacancy rate is now at a record high, while the secondary market continues to struggle to get serious traction.
8,900sqm to the State Government in 140 Creek Street.
National DirectorHead of Leasing - QLD
+61 7 3231 1315
Horse. The good quality thoroughbreds (Prime and A grade Buildings) are getting all the attention. The old nags and donkeys (old non refurbished buildings) are left out in the back paddocks.
Continuing uncertainty at a political level in the National and global markets.
A Grade market will continue to tighten over the next 12 months with large continuous banks of space remaining limited between now and 2018. At least one development will commence in the FV precinct with limited new stock being delivered from 2018 and beyond.
Associate Director, Office Leasing, Queensland
T: +61 7 3231 1348M: 0402 792 238F: +61 7 3231 1314
Greyhound. Fast and nimble, but likely to run out of steam in 12 months.
Organic growth from smaller businesses, consolidation from larger ones and centralisation
Equilibrium market whereby both tenant and landlord have opportunities to transact. Effective rental growth will be stronger for landlords with renewing tenants, than those transactions required to attract new building tenants.
Head of Leasing - Victoria
+61 3 9672 6531
Salmon – working its way up stream but faces challenges along the way.
Whilst market conditions prevail, occupiers strive to improve their accommodation standard and seek to achieve greater efficiencies where available.
Short term project users are becoming apparent for quality fitted options, which is enabling occupiers with lease legacy to minimise lease exposure.
A topical item relevant to the city fringe market relates to the future Melbourne Metro Railway Link which provides a new 9 kilometre rail link between Melbourne’s inner south and north and provides 5 new train stations. The benefit to markets within the new stations (St Kilda Road, Carlton & Parkville) on completion of the project will be of great benefit to commercial buildings within walking distance of the newly established stations.
With limited stock availability in A-Grade markets, rents are anticipated to steadily rise for this sector of the market. Pressure would therefore reasonably expect to flow through to incentives reducing.
New office projects to ideally follow to support a pent up demand.
Associate Director - Victoria
+61 3 9672 6636
Demand in the second quarter of the year slowed considerably as we moved into election mode where traditionally business leaders adopt a wait, watch and see mentality. This year was no different especially given how closely run the campaign was. This combined with a normally slow end of financial year period meant that little or no major transactions were reported.
With this now behind us we are expecting a big pick up in deals moving toward the tail end of the year and expect Q3, 2016 to have over 50% of this years leasing transactions squashed into it.,
This year the Melbourne suburban market can best be described as a bear. We have been in hibernation for nearly 6 months. Now having been through the worst of winter, so to speak, we believe the beast will awaken for a strong second half of the year.
The past three months has been dominated by infrastructure and project groups looking to secure fitted space for major projects on shorter term leases. Groups like Fulton Hogan, John Holland & Lend Lease to name a few have all been actively in the market.
We have also seen considerable demand increase for fitted A grade space in the Inner East with Buildings like Build 8, 658 Church Street and 5 Burwood Road now being mostly leased. These deals have seen new benchmarks hit for leasing in terms of Face Rentals.
The overall economy is having some dampening effect on the market and the increase in direct and subleasing opportunities in the south east is creating more competition for the limited amount of demand.
The two speed market will continue this year with limited demand for the outer east market and strong demand in the inner east and fringe markets. Rents will continue to grow where the demand is high and stock levels continue to tighten.
Director, Office Leasing,Glen Waverley
+61 03 9565 6617
An Ox – A fairly nondescript looking animal, an ox can actually pull and carry up to 900kg, or 1.5 times its body weight. Like an Ox, the Canberra market looks fairly unremarkable and sluggish on the surface. Drill deeper however, and it has the second tightest prime vacancy in the country, and it more than pulls its weight for diversified property funds!
Growth in the Private Sector continues to drive net absorption in the ACT. In particular, growth and contraction of Defence-affiliated service firms, IT, Recruitment and Legal.
The Commonwealth Government’s occupation of space plays a critical role to the health and stability of the Canberra Commercial Office Market. A double election year (both at a Federal and Local level) has impacted occupier confidence. Furthermore, the a Change of Government could create “Machinery-of-Government” churn that generates enquiry. Department of Finance continues to have a major impact on leasing activity within the ACT, mandating a “cost-benefit” analysis be undertaken prior to leasing decisions being made.
Largely speaking, there is a growing sentiment of positivity in the ACT and this will continue throughout the remainder of 2016 and into 2017. Stock withdrawal for either residential or hotel development looks set to intensify, with limited new developments in the pipeline. Solid take-up of space will force the vacancy figure southwards, increasing effective rents and quality opportunities for tenants in the A-grade cohort of the market will dwindle.
Managing DirectorSales and Leasing - ACT
+61 2 6274 9818
Vacancy remains high in the CBD, and has increased further in the West Perth Market. This has resulted in leasing incentives increasing and rents softening further. Opportunities to upgrade and favourable conditions for tenants are driving tenant enquiry and leasing activity.
A Stingray – Travelling along the bottom at the moment, but is tough and aggressive in the right conditions.
Regional DirectorHead of Leasing - WA
+61 8 9483 8423
Enquiry slowed noticeably through the latter stages of the second quarter. Transactions are taking longer to conclude with tenants assessing multiple options in greater detail than ever before.
A hibernating bear.
Smaller tenants continue to drive enquiry with the vast majority of tenants in the market seeking tenancies smaller than 500 square metres. IT and technology businesses have been most active with not-for-profit businesses most active in the suburban markets.
The relatively high incentives available in the CBD are drawing tenants away from the suburbs and into the city. The trend towards consolidation and centralisation looks set to continue with many occupiers demanding greater efficiency and a more comprehensive offering from their leased property.
Broader economic conditions seem to be having a dampening effect on South Australian business. Confidence is fragile, which means investment decisions are being postponed or cancelled.
Any significant new development is unlikely without major pre-commitment which means supply should remain subdued. Vacancy should stabilise in the Prime market but will likely remain high in the secondary market as tenants gravitate towards newer buildings. Demand will recover, but it will be a slow recovery.
Head of Leasing - SA
+61 8 8233 8898