No Relief for Sydney’s Commercial Tenants
A shortage of CBD stock has contributed to the ongoing strength of the Sydney office market, driving both capital and rental growth, with the vacancy rate dipping to 4.6 per cent – the lowest in almost 10 years. This is predicted to fall again to 4.5 per cent by July 2018, according to Colliers International.
And if tenants are on the hunt for space upwards of 5000 square metres this year, there are only six prime-grade options to choose from. On top of that, the only new office development to be completed in 2018 is Investa’s Barrack Place, which is 60 per cent pre-committed and a further 28 per cent under “heads of agreement”.
Nearly 100,000 square metres, or 2 per cent of stock, was withdrawn from the CBD market in the six months to January 2018. Average net face rents are forecast to grow about 7 per cent across all grades in 2018, Colliers International figures indicate. For tenants, relief from soaring rents is not expected for at least another two years, until the market enters the next supply cycle in 2020.
Strong demand from foreign investors, especially from Singapore and Hong Kong, is contributing to that growth.