Spotlight on Sydney’s Commercial Office Market
Sydney’s commercial office market is finally slowing down, after five years of unprecedented growth. Let’s take a closer look at what’s happened over the past year, and at three encouraging trends that are working in tenants’ favour.
Unless your premises are in Macquarie Park (where rental rates have stayed relatively flat over the last year at just under $400 per square metre), you’ve probably experienced a hefty hike.
Average rental rates for A-Grade spaces in the Sydney CBD have increased by more than 12%. Expect to pay an average of about $1,180 gross per square metre – by far the highest rate in Australia. B-grade CBD office premises now sit at an average of $1,000 gross per square metre.
These increases haven’t just been confined to the CBD either.
North Sydney has seen an average rise of about 10% for office digs during the past 12 months. A-Grade premises there will now set you back (on average) just over $900 gross per square metre, and a little over $800 gross per square metre for B-Grade suites.
Further out, comparable A-Grade space in Parramatta has increased by more than 15%. However, average rental rates are still much cheaper, averaging out at around $635 gross per square metre. Expect to pay about $550 gross per square metre for B-Grade premises.
The increase in rents hasn’t really affected vacancy rates in the Sydney office market. Here’s a quick snapshot:
- Sydney CBD: about 4.5% (well below the national CBD average of around 10%)
- North Sydney: about 8%
- Macquarie Park: about 6%
- Parramatta: approximately 3%.
Three encouraging trends affecting Sydney’s commercial office market
Sydney office rents are currently high and vacancy rates low. But this situation is likely to change in the short-to-medium term. There are a few reasons for this:
1. An imminent increase in stock
About $4.8 billion worth of commercial real estate projects are currently under construction in the Sydney CBD. And a further $3.1 billion worth of projects are scheduled to start.
These developments will dramatically increase the supply of office space over the next few years, helping to stabilise or put downward pressure on rental rates.
Here are a few of the many upcoming developments:
- Circular Quay Tower, 33-35 George Street
- Wynyard Place, 285-301 George Street
- AMP Centre Tower, 50 Bridge Street
2. The rise in demand for co-working spaces
Like most countries around the world, the demand for co-working spaces is increasing in Australia. And this trend shows no signs of slowing down.
Coworking spaces allow independent people and businesses to network and share office space.
They’re great for small businesses, start-ups and the growing number of independent contractors because memberships allow for shorter-term, more flexible leases.
Even larger organisations are jumping on the coworking bandwagon as a means of staying flexible and on top of the competition in terms of innovative new products and ideas.
3. Upcoming railway closure
Rent rates in Macquarie Park have already been affected by the looming temporary closure of the Epping to Chatswood line.
The track will soon be upgraded to the Sydney Metro System, and about 20,000 people who currently use this train service will have their travel disrupted.
Although a new bus service will be in operation during this period, businesses in the area are likely to be impacted. And this reality has seen rents flatline in the area over the past year.
This downward spiral is likely to continue, at least until completion of the rail line works in the first half of 2019.
Tenant Representation Sydney
Tenant CS is a commercial tenant advisory service that offers tenant representation services across Australia, with a particular focus in Sydney, Melbourne, Perth, Adelaide, Brisbane and Canberra. We represent you, the tenant and our in-depth knowledge of the Australian leasing market gives our clients the competitive advantage when it comes to finding a space or negotiating a commercial lease.
If you’re on the hunt for tenant representation services in Sydney, get in touch with our team today!