Sydney’s ‘back of office’ markets maintain momentum as organisations look to tighten up in today’s climate
SYDNEY, June 01, 2020 – Parramatta, North Sydney and Macquarie Park are proving to be the ‘go to’ precincts as organisations look to decentralise their workforces.
JLL’s Western Sydney’s Senior Leasing Director, Ben Lalic said, “Back of office markets do well in times of downturn not just because office space is cheaper, but because there becomes an economic case for job reductions and this in turn creates vacancy in the back of office market.”
“In this current environment, it is logical for businesses to sublease or relinquish their CBD space and shift their workers into the ‘back of office’ precincts where rents for A-Grade buildings in Parramatta are approximately 50 percent less than A-Grade CBD stock,” he said.
According to JLL Research, 1Q 2020 vacancy in Parramatta was recorded at 4.1% - the second lowest of the 19 office markets JLL Research tracks in Australia. Prime vacancy was recorded at 0.9% in the first quarter,the lowest prime grade vacancy rate of the JLL-monitored office markets in Australia.
“Right now, real estate is a cost and organisations engaging in cost reduction measures will seek to re-align their space requirements with future headcount expectations, so organisations will naturally be pulled towards the more cost-effective markets that maintain a strong offering of prime grade stock like Parramatta, North Sydney and Macquarie Park,” Mr Lalic said.
Mr Lalic noted that lower rents were not the only factor pulling businesses out to these markets.
“Moving forward, companies are looking for buildings that are conveniently accessible for their employees. Parramatta has really cemented its status as a second central business district with amenity for staff now in abundance as well as being very accessible by major public transport.”
“Having all the right foundations for major public and private sector users such as the NSW Government, Westpac and NAB and being offered at a fraction of Sydney CBD rents, the precinct will benefit from companies looking to reduce cost while still being able to provide the necessities for staff,” Mr Lalic said.
Looking to North Sydney, vacancy rose to of 8.5% over 1Q 2020. The elevated vacancy rate wasattributed to the addition and completion of new development builds in the back half of 2019.
JLL’s Head of Northern Sydney, Paul Lynch said, “Development activity has been thriving across Northern Sydney, particularly in the North Sydney and Macquarie Park office markets where it shows no sign of slowing.
According to JLL Research, throughout 2020, 78,000 sqm of prime grade office buildings are being delivered in North Sydney, which equates to nearly 10% of the total office stock in the market. These new developments have already received extensive pre-commitment by organisations such as SAP, Nine, Microsoft and oOh!Media.
In Macquarie Park, approximately 50,000sqm of new office stock will be delivered over 2020, with 34,947 sqm having already completed at the NSW Government-tenanted ‘Glasshouse’ building at 45-61 Waterloo Road.
“Public sector decentralisation activity into the major metropolitan office markets will continue to drive demand moving forward. As well, demand will be supported by organisations within the healthcare, education and technology sectors given the ongoing presence of Macquarie University within the market,” Mr Lynch said.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.